Markets
Possible Triple Bottom Forming on S&P 500 Index?
Inflation Expectations Dive Amid Healthy Wage Growth
Potentially Bullish Chart for Crude Oil
S&P 500 Trying to Recover from Volatile October
Stock Market Weakness Pressures China
Santa Comes in December
Fewer Companies Have Cited “Tariff” on Q3 Earnings Calls
Earnings Growth May Be Peaking, but 2019 Still Looks Pretty Good
Energy Stocks Have Not Kept Up with Oil
British Pound and Euro Drop to 1.5-Year Lows on Brexit Deal News
Gains During Midterm Election Years Tend to Come Late
A Big Year-End Bounce Is Possible For Stocks
Stock Market Performance Under a Unified or Split Washington
The Calendar Is a Bull’s Best Friend
Latest Stock Market Decline Leaves Valuations Attractive
–The latest S&P 500 Index pullback, which has been accompanied by rising earnings, leaves the S&P 500 at just over 15 times the next 12 months’ earnings estimates.
–That level is below the long-term average of 15.7 (since 1950) and the post-1980 average of nearly 16.7 (FactSet data).
Tracking #1-788094 (Exp. 10/19)
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LPL Research, FactSet 10/26/18
Important Disclosures:
Forward price-to-earnings is a measure of the price-to-earnings ratio (PE) using forecasted earnings for the PE calculation. While the earnings used are just an estimate and are not as reliable as current earnings data, there is still benefit in estimated PE analysis. The forecasted earnings used in the formula can either be for the next 12 months or for the next full-year fiscal period.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.
All indexes are unmanaged and cannot
be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of
future results.
The opinions voiced in this material
are for general information only and are
not intended to provide or be construed
as providing specific investment advice
or recommendations for any
individual security.
The Largest Daily Changes Tend to Happen Beneath the
200-Day Moving Average
– The majority of the largest gains and losses for the S&P 500 Index from 1950–YTD took place beneath the 200-day moving average.
– With the S&P 500 currently beneath this important trendline, more volatility could be in store for investors.
Tracking #1-786426 (Exp. 10/19)
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LPL Research,FactSet 10/25/18
Important Disclosures:
The modern design of the S&P 500
stock index was first launched in 1957. Performance back to 1950 incorporates
the performance of predecessor index,
the S&P 90.
All indexes are unmanaged and cannot
be invested into directly. Unmanaged
index returns do not reflect fees, expenses, or sales charges. Index performance is
not indicative of the performance of any investment. All performance referenced
is historical and is no guarantee of
future results.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
Stocks Tend to Bounce the Last Part of October
– Month to date, the S&P 500 Index is heading for its worst month since February 2009 and the worst October since 2008.
– However, history shows the last few days of October are some of the strongest days of the year. With markets extremely oversold, the stage could be set for a rally.
Tracking #1-785984 (Exp. 10/19)
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LPL Research, FactSet 10/24/18
Important Disclosures:
The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates
the performance of predecessor index, the S&P 90.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced
is historical and is no guarantee of
future results.
The opinions voiced in this material are
for general information only and are not intended to provide or be construed as providing specific investment advice
or recommendations for any
individual security.
What Happens If You Miss the 10 Best and Worst Days
of the Year?
– If you could have avoided the 10 worst days of each year for the S&P 500 Index since 1990, you would have had average annual gains of close to 40%.
– Even if you missed the 10 best days of each year, you still would have been in the green six times (1991, 1995, 1996, 1997, 2013, and 2017).
Tracking #1-783699 (Exp. 10/19)
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LPL Research, FactSet 10/16//18
Important Disclosures:
All indexes are unmanaged and
cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
The opinions voiced in this material
are for general information only and are
not intended to provide or be construed
as providing specific investment advice
or recommendations for any
individual security.
Corrections Are Normal, Even in Positive Years
– S&P 500 has produced a positive total return (with dividends) in 33 of the past 39 years going back to 1980, including 2018 year to date.*
– During that period, the average annual maximum peak-to-trough decline in the index was 14%. Even during positive years, the average maximum drawdown
in the index was 11%.
Tracking #1-783651 (Exp. 10/19)
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LPL Research, FactSet 10/11/18
Important Disclosures:
*2018 data represents year-to-date performance through 10/11/18.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
Volatility Is Normal in October
– October should be known for volatility, not crashes, as no month has seen more 1% changes (up or down) for the S&P 500 Index going back to 1950.
– October is also about average in terms of its month-end returns (according to data back to 1950).
– Given the positive fundamentals, we expect the markets to weather this recent volatility and we see potential for a year-end rally.
Tracking #1-780797 (Exp. 10/19)
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LPL Research, FactSet 10/10//18
Important Disclosures:
The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates
the performance of predecessor index, the
S&P 90.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced i
s historical and is no guarantee of
future results.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
Stocks Are Usually Strong After a Midterm Election
– Looking at the past 18 midterms (back to 1946), the S&P 500 Index was higher a year later each time.
– This helps put in perspective just how much of a tailwind the calendar could be
for investors.
Tracking #1-780894 (Exp. 10/19)
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LPL Research, FactSet 10/05/18
Important Disclosures:
The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1928 incorporates the performance of predecessor index, the S&P 90.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
The opinions voiced in this material
are for general information only and
are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
October Tends to Be a Strong Month for Stocks During
Midterm Years
– We’ve just wrapped up the best quarter for the S&P 500 Index since Q4 2013.
– Historically, the last three months of the year have been the strongest,
particularly during midterm election years, so we could potentially see another
strong quarter ahead.
Tracking #1-777848 (Exp. 10/19)
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LPL Research, FactSet 09/28/18
Important Disclosures:
The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates
the performance of predecessor index, the
S&P 90.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced i
s historical and is no guarantee of
future results.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
Stocks Have Historically Done Well During Periods of Rising Interest Rates
– Since 1996, stocks have risen with higher rates every single time (12 out of 12 times).
– Since 1962, the S&P 500 Index has gained an average of 6.1% during the rising rate periods, with gains in 83% of those periods.
Tracking #1-775867 (Exp. 09/19)
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LPL Research, FactSet 09/21/18
Important Disclosures:
*Note that the current period of higher interest rates is still active and not included in the aggregated calculations.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any
individual security.
The Next Three Quarters Are Historically Bullish for Stocks
– Beginning when the Dow started trading in 1896, each of the next two quarters have closed higher 73.3% of the time.
– The average returns over the next three quarters were 4.0%, 5.2%, and 3.6%—some of the strongest in the four-year presidential cycle.
Tracking #1-773359 (Exp. 09/19)
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LPL Research, FactSet 09/15/18
Important Disclosures:
All indexes are unmanaged and
cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
Just How Often Do U.S. Stocks Return the Average?
– Since 1926, U.S. stocks have averaged 5–10% returns per year.
– However, only 7 times have the actual returns fallen in that range.
Tracking #1-770982 (Exp. 08/19)
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LPL Research, Vanguard, MSCI 08/16/18
Important Disclosures:
All indexes are unmanaged and cannot
be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is
not indicative of the performance of
any investment.
All performance referenced is historical
and is no guarantee of future results.
U.S. Stock returns are represented by the performance of the following indexes: the Standard & Poor’s 90 from 1926–March 3, 1957; the Standard & Poor’s 500 Index from March 4, 1957 to 1974; the Wilshire 5000 Index from 1975 to April 22, 2005;
and the MSCI US Broad Market
Index thereafter.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
EM Can Be Positive for the Year and Still Have Large
Intra-Year Pullbacks
– When it comes to Emerging Markets (EM), big pullbacks can be quite normal.
– Going back 15 years, the MSCI Emerging Markets Index pulled back at least
15% (intra-year peak to trough) 11 times. In six of those years, the index finished the year higher.
Tracking #1-771164 (Exp. 09/19)
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LPL Research, FactSet 09/07/18
Important Disclosures:
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
Telecommunication Services Revamp Will Lead to Significant Shift in S&P 500 Sector Weights
– S&P 500 GICS sectors will undergo a significant shift later this month with a big expansion and rebrand of the telecom sector.
– Investors employing sector strategies should be aware of the revamp, which will meaningfully change the makeup of the consumer discretionary and technology sectors.
Tracking #1-766879 (Exp. 08/19)
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LPL Research, S&P Dow Jones Indices, MSCI, FactSet 08/29/18
Important Disclosures:
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
Because of its narrow focus, investing in a single sector, such as energy or manufacturing, will be subject to greater volatility than investing more broadly across many sectors and companies.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific
investment advice or recommendations
for any individual security.
Earnings Estimates Rising Amid Trade and Tariff Concerns
– During reporting season, S&P 500 Index earnings per share estimates for the next year rose 0.5%, reflecting generally upbeat guidance.
– Tax cuts help, but traditional drivers of earnings—notably business investment and manufacturing trends—also look good.
Tracking #1-766340 (Exp. 08/19)
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LPL Research, FactSet 08/24/18
Important Disclosures:
Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
The economic forecasts set forth in this material may not develop as predicted.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific
investment advice or recommendations
for any individual security.
This Is Now the Longest Bull Market Ever
– The bull market that started back in March 2009 is now officially the oldest bull market ever—topping the duration of the bull from the 1990s.
– But it isn’t the greatest, as the 1990s bull market gained 418% at its peak; well above the 323% gains of the current bull market.
Tracking #1-763728 (Exp. 08/19)
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LPL Research, FactSet, CFRA 08/21/18
Important Disclosures:
The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1928 incorporates
the performance of predecessor index, the S&P 90.
All indexes are unmanaged and cannot
be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced
is historical and is no guarantee of
future results.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
Short-Term Inflation Expectations at Lowest Point of 2018
– Shorter-term break-even inflation rates have dropped to their lowest levels of the year.
– This movement implies market expectations for persistent inflation continue to dwindle, even amid the strongest Consumer Price Index and Producer Price Index readings of the economic cycle.
Tracking #1-761340 (Exp. 08/19)
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LPL Research, Bloomberg 08/13/18
Important Disclosures:
The economic forecasts set forth in this material may not develop as predicted.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
Bulls Could Be Smiling the Rest of 2018
– The S&P 500 has historically grown an average of nearly 10% over the final five months of the year when each month from April through July was higher (as is the case in 2018).
– This trend suggests higher prices may be likely going into the end of 2018.
Tracking #1-758518 (Exp. 08/19)
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LPL Research, FactSet 08/07/18
Important Disclosures:
The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of the predecessor index, the S&P 90.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The economic forecasts set forth in the presentation may not develop as predicted.
Investing involves risk, including loss of principal.
Past performance is no guarantee of future results.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, sales charges, or expenses. Index performance is not indicative of the performance of any investment.
Intra-Market S&P 500 Correlations Have Fallen
– Since Q4 2016, correlations of S&P 500 stocks to the index have generally fallen, giving active managers more chances to differentiate themselves from the indexes they are trying to beat.
– More dispersion among individual stocks makes it easier to find winners, giving managers a bigger pond of potential outperforming stocks to fish in.
Tracking #1-754944 (Exp. 07/19)
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LPL Research, Ned Davis Research 07/25/18
Important Disclosures:
Correlation ranges between -1 and +1. Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move in the opposite direction. If the correlation is
0, the movements of the securities are said to have no correlation; they are
completely random.
Active management involves risk as it attempts to outperform a benchmark index by predicting market activity, and assumes considerable risk should managers incorrectly anticipate changing conditions.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses,
or sales charges. Index performance
is not indicative of the performance of
any investment.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
Another 20% Earnings Growth Quarter Expected
– Second quarter earnings season is underway and may be another good one, potentially marking the eighth straight quarterly increase.
– Consensus estimates are calling for a 21% year-over-year increase in S&P 500 Index earnings, setting up a second straight quarter of 20% or higher growth.
Tracking #1-754940 (Exp. 07/19)
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LPL Research, FactSet 07/20/18
Important Disclosures:
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results. Estimates may not develop as predicted.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
An Inverted Yield Curve Isn’t Trouble Immediately
– The flattening yield curve has many investors on edge, as the past 9 times the yield curve inverted led to a recession.
– It is important to note that the yield curve hasn’t inverted yet. Additionally, even after it had inverted, the economy hadn’t immediately fallen into a recession and stocks had sported gains until a recession starts.
Tracking #1-748116 (Exp. 07/19)
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LPL Research, FactSet, NBER 07/05/18
Important Disclosures:
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Yield Curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates. The curve is also used to predict changes in economic output and growth.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced
is historical and is no guarantee of
future results.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
Flattening Yield Curve Pressuring Financials
– The flatting yield curve has been pressuring financials in recent months.
– On a relative strength basis the sector has still preserved a fair amount of 2016 election-driven outperformance versus the S&P 500 Index.
Tracking #1-746947 (Exp. 07/19)
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LPL Research, Bloomberg 06/28/18
Important Disclosures:
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The S&P Financials Index is a market capitalization weighted index that tracks the performance of financial companies.
Yield curve represents the spread between yields on the 10-Year and 2-Year U.S. Treasuries.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
A spread is the differential between a yield of a bond and the yield of a comparable maturity Treasury security. As Treasury securities have very low risk, this spread can be seen as an investor gauge of sentiment, with a higher spread indicating greater concern.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
A Good Sign For Bulls?
– Small caps have been very strong this year. In fact, the Russell 2000 Index has closed higher 8 consecutive weeks for the first time since 2013.
– This rare event may signal surprisingly bullish future equity returns, as the S&P 500 Index has closed higher six months later each of the past 9 times.
Tracking #1-745348 (Exp. 07/19)
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LPL Research, FactSet 06/25/18
Important Disclosures:
* Indicates current win streak is still active.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Investing involves risks including possible loss of principal.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
Past performance is no guarantee of
future results.
The opinions voiced in this material
are for general information only and
are not intended to provide or be
construed as providing specific investment advice or recommendations for any individual security.
<
>
Market Performance Under Unified or Split
Click on an image below to display:
A Good Sign
for Bulls?
Flattening Yield Curve
Inverted Yield Curve
Intra-Market S&P 500 Correlations
Second Quarter Earnings Season
Bulls Could
Be Smiling
Short-Term
Inflation Expectations
Longest Bull
Market Ever
Earnings
Estimates Rising
Shift in S&P 500 Sector Weights
EM and
Intra-Year Pullbacks
U.S. Stocks Calendar Year Returns
Historically Bullish
for Stocks
Stocks and Rising Interest Rates
Stocks During Midterm Years
Volatility Is Normal
in October
Stocks After
Midterm Election
Corrections
Are Normal
10 Best and Worst Days of the Year
Stocks Tend
to Bounce
Largest Daily Changes
Valuations Attractive
After Market Decline
Big Year-End Bounce Possible for Stocks
The Calendar Is a Bull’s Best Friend
Gains During Midterm Elections
British Pound and Euro Drop
Energy Stocks Have Not Kept Up with Oil
Earnings Growth
May Be Peaking
Fewer Companies Cited "Tariff"
Santa Comes
in December
Trying to Recover from Volatile October
Market Weakness Pressures China
Potentially Bullish Chart for Crude Oil
Healthy Wage
Growth
Possible Triple
Bottom Forming?
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
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