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In this edition of LPL Market Signals, LPL Financial strategists Quincy Krosby, Jeffrey Roach, and Lawrence Gillum discuss the midyear outlook along with what to expect with the unofficial kick off to earnings season and the economic data releases that may move markets this week.

The strategists note the first half of the year was characterized by market volatility and turbulence but, while volatility is expected to continue, markets may be in a good position to rebound given the expected resilience of the consumer and strength of corporate balance sheets. On the economy, the strategists noted that while inflationary pressures were likely to stay elevated this year, it is expected that inflationary pressures would likely come down over the course of 2022 and 2023.

The strategists then discussed the outlook for stocks after one of the worst starts to the year ever. While the first half was characterized by higher inflation levels and an expected aggressive response by the Federal Reserve (Fed), the team thinks that the Fed can be less hawkish- not dovish but just less hawkish, which should help markets move forward.

Bond market outlook was next with the strategists noting that as bad as the year has been, the silver lining is that value has been brought back into the bond market. With yields in many markets above longer term averages, now could be a good time to opportunistically invest in fixed income. Additionally, the strategists think that now that yields have increased this year, bonds may be able to regain the diversification benefits that traditionally accompany negative stock prices.

Finally, the strategists discuss the upcoming earnings data, which is especially important as markets try to assess whether the bear market—brought on by an aggressive Federal Reserve interest rate hiking campaign—will lead us into a recession and the inflation data set to be released on Wednesday. The consumer price index (CPI)—which has stayed stubbornly high when you include the volatile food and gas components but may have peaked when you strip out those volatile categories. Continued high non-core prices (food and energy), along with high prices of travel-related categories and tight labor markets remain worrisome for the Fed.

Read LPL Research’s Midyear Outlook: Navigating Turbulence.

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Listen to the entire podcast to get the LPL strategists’ views and insights on current market trends in the U.S. and global economies. To listen to previous podcasts go to Market Signals podcast. You can subscribe to Market Signals on iTunesGoogle Podcasts, or Spotify and find us on the LPL Research YouTube channel.



This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth in the podcast may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Stock investing includes risks, including fluctuating prices and loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States.

The Bloomberg U.S. Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States.

All index data is from FactSet.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Core CPI is a subset of the total Consumer Price Index (CPI) that excludes the highly volatile food and energy prices. It is released by the Bureau of Labor Statistics around the middle of each month. Compare to Personal Consumption Expenditures (PCE); Core PPI; Producer Price Index (PPI).

Personal consumption expenditures (PCE) is a measure of price changes in consumer goods and services released monthly by the Bureau of Economic Analysis (BEA). Personal consumption expenditures consist of the actual and imputed expenditures of households; the measure includes data pertaining to durables, nondurables, and services. It is essentially a measure of goods and services targeted toward individuals and consumed by individuals.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by LPL Financial, LLC. 


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