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Taking Down S&P 500 Target

LPL Strategists reduce their S&P 500 Index yearend target, citing sharply higher interest rates. LPL Financial Chief Market Strategist Ryan Detrick stresses that the bull market is alive and well but is just entering a new phase. The path to strong gains has gotten tougher with future profits worth less in today’s dollars. But, as Equity Strategist Jeffrey Buchbinder points out, this is not an earnings call. Fundamentals remain quite strong. The strategists also note that they have raised their yearend target for the U.S. 10-year Treasury yield to 2.25 – 2.5%, while acknowledging the risk of higher yields in the short term.

Slower Economic Growth

Despite recently lowering the U.S. GDP forecast, the LPL Research Strategic and Tactical Asset Allocation Committee (STAAC) still sees downside risk to its forecast of 3.7% growth based on the latest data. The Committee still sees above-trend growth in 2022 with low recession risks, even though they have increased. The strategists note that spending on restaurants, recreational activity, and travel-related accommodations provides a unique look at discretionary spending and suggests the consumer is likely holding back some on discretionary spending due to persistently high prices.

April Seasonality?

April has historically been a strong month for the stock market. Jeff and Ryan note that while the market’s expectations for inflation and its ramifications may be the biggest keys to the near-term market outlook, convincing evidence that inflation has peaked may not arrive until after May begins. Nonetheless, markets may have reached “peak Fed hawkishness.” As markets potentially pull back on rate hike expectations, longer-term rates may stabilize, potentially providing stocks with support. A path to a ceasefire in Ukraine and the start of first quarter earnings season may also buoy investor sentiment.

Tune In Now

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 iTunes, Google Podcasts, or Spotify and find us on the LPL Research YouTube channel.

 

IMPORTANT DISCLOSURES

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.

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.

All index data is from FactSet.

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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