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Charting the Market's Course
This week we highlight seven key charts to watch that may determine the stock market’s near-term direction. The charts cover a wide range of topics including manufacturing sentiment, earnings, oil, and high-yield bonds. We believe these charts can help investors navigate the market’s course for the balance of 2015 and into 2016.
Earnings Preview
by Burt White of LPL Financial,
Third quarter earnings season will potentially look a lot like the second quarter. This quarter’s earnings preview could almost be a copy and paste of the second quarter preview: It looks like we will get meager earnings growth, if we get any at all. The media will again tout earnings recession, which we discussed on April 6, 2015. The big headwinds from energy sector weakness and a strong U.S. dollar remain. And the big overseas worries are again unlikely to have much impact on earnings overall, as business conditions in the U.S.?—?outside of the energy sector?—?are pretty good.
It Ain't Over 'Til It's Over
by Burt White of LPL Financial,
Yogi Berra passed away last week at the age of 90. One of the greatest baseball players of all time, Berra was probably known more for his funny sayings (so-called “Yogi-isms”) than he was for his impressive career as a New York Yankee that lasted from 1946 until 1963 and included 3 MVP awards and 10 World Series championships. Some of these Yogi-isms are relevant for investors, including: 1) it ain’t over ‘til it’s over, 2) déjà vu all over again, and 3) the future ain’t what it used to be. Berra also famously once said, “Make a game plan you can stick to…unless it’s not w
Fed Implications
by Burt White of LPL Financial,
The Federal Reserve’s (Fed) decision not to raise interest rates at its September 17 policy meeting was undoubtedly the biggest event of last week. Although not a big surprise, besides Donald Trump (and perhaps China), the Fed is all that anyone is talking about these days. This week we share some of our perspective on what the Fed’s decision may mean for the stock market and offer some investment ideas.
Should Emerging Market Investors Fight the Fed?
by Burt White of LPL Financial,
Emerging market stocks have not won much lately, but the Fed may be a winnable fight. The Federal Reserve, which announces its policy decision on September 17, 2015, is on the verge of starting a rate hike cycle for the first time in more than 10 years. We have previously written that the start of Fed rate hikes has not marked an impending end to bull markets for U.S. stocks (despite the popular Wall Street adage “don’t fight the Fed.”) In reality, the first rate hike has told us we are about halfway through the cycle as discussed in our Weekly Market Commentary of August 25, 2014.
Consulting Our Technical Playbook
by Burt White of LPL Financial,
When markets are tough, emotions can take over. The natural emotional response to sharp stock market declines is to sell. In periods like these, especially when the media sensationalize every gloomy angle as they tend to do, an objective look at the data can be reassuring and help us make better investment decisions.
12 Questions for a 12% Correction
by Burt White of LPL Financial,
The recent market downdraft and related uncertainty in China have led to many investor questions. The strong 6.5% rebound in the S&P 500 over the last three trading sessions (August 26, 27, 28, 2015) has cut the S&P 500’s losses from the 2015 peak (2130 on May 21, 2015) to 6.7%. In response to the S&P 500’s recent 12% correction?—?the first decline of more than 10% since 2011?—?we answer 12 investor questions. Bottom line, we do not expect the latest correction and China uncertainty to lead to the end of the U.S. economic expansion or the end of the six-and-a-half-year old bull
What We Can Learn by Going Back to School
by Burt White of LPL Financial,
The summer has flown by and some children are already going back to school this week. The back to school shopping session is considered the second most important selling season for retailers (after the Christmas/winter holidays), which we think is a good reason to check in on the health of the U.S. consumer and provide our latest thoughts on the consumer discretionary sector. Expectations for this season are low, but several consumer spending tailwinds suggest the sector may be poised to outperform over the rest of the 2015.
Earnings Update: Corporate Resilience
by Burt White of LPL Financial,
Once again, earnings season highlights corporate America’s resilience. Investors were braced for an earnings decline in the second quarter of 2015 but will almost certainly end up with another quarterly earnings gain despite the significant drags from the oil downturn and strong U.S. dollar, largely thanks to effective cost controls that have propped up profit margins. With more than two-thirds of S&P 500 companies having reported second quarter 2015 results, we provide an earnings update.
U.S. Dollar Still Stands Tall
by Burt White of LPL Financial,
The U.S. dollar remains strong, defying some skeptics. As has been the case since late 2008 when the Federal Reserve (Fed) began its quantitative easing (QE) program, there has been a great deal of concern recently among some market participants that the dollar is on the verge of a significant decline. Although the dollar may have lost some market share relative to other global currencies in recent decades, it remains the dominant global currency (often referred to as a reserve currency) and we expect it to remain so for the foreseeable future.
Greece Playbook
by Burt White of LPL Financial,
Greece’s critical referendum took place this weekend and the Greek people resoundingly voted “no”?—?rejecting the latest bailout deal from creditors. The referendum result, which some interpreted as a vote to exit the Eurozone, throws Greece’s future in the currency union firmly in doubt. The unexpected result has led to a roughly 2% decline in the broad European indexes but only a modest decline in the S&P 500 (as of 3 p.m. ET today, July 6, 2015). The negative market reaction in Europe is not surprising, given polls heading into the weekend suggested a vote for the bailout was
Batteries Not Included: Midyear Stock Market Outlook
Expect the bull market to continue through 2015. In the stock market, 2015 has felt like déjà vu. In 2014, the year began with a tough first quarter and finished strong. After a weak start to the year, we believe that corporate America will provide a much needed boost for the second half and 2015 may also finish strong?—?providing the seventh year of positive returns, in the 5?–?9% range we forecast.
Earnings Recap: Good Enough?
by Burt White of LPL Financial,
The first quarter 2015 earnings season is virtually over and the results relative to lowered expectations were quite good. Investors were braced for an earnings decline and the possible start of an “earnings recession,” but it looks like they will end up with a better than feared, year-over-year earnings growth rate of about 2%, according to Thomson Reuters data. This pace is impressive considering the significant drags from the oil downturn and strong U.S. dollar. Here we recap the first quarter 2015 earnings season and share our earnings outlook for the rest of 2015.
Sizing Up Small Caps
by Burt White of LPL Financial,
The Russell 2000 Index hit a fresh all-time high last week (on tax day, April 15, 2015) and has outpaced large caps by 205 basis points (2.05%) year to date. Although valuations are on the high side, the factors that have driven recent small cap strength, in our view, remain largely intact. Small cap technicals appear bullish, with positive relative strength and an upward sloping 40-week moving average.
China: New Year, New Opportunity?
by Burt White of LPL Financial,
China will release its first quarter 2015 gross domestic product (GDP) report this week on April 14, 2015, with the market expecting a 7% year-over-year increase. Regardless of whether China hits that target, its stock market has already been positive so far this year. In this year of the goat in 2015, global investors have not been sheepish about buying Chinese stocks, powering the Shanghai Composite 25% higher so far in 2015 amid prospects for more monetary stimulus and policy reforms.
Earnings Recession?
by Burt White of LPL Financial,
Earnings season kicks off this week (April 6?–?10) with Alcoa set to report first quarter 2015 earnings on Wednesday, April 8. This earnings season has received a great deal of attention in recent weeks because it may produce the first year-over-year decline in S&P 500 operating earnings since the tail end of the financial crisis during the third quarter of 2009. We preview earnings season and highlight reasons not to fear a potential decline.
Market's March Madness
by Burt White of LPL Financial,
With the NCAA Final Four set, we share our own Final Four for stock market investing: economy, earnings, technicals, and valuations. With valuations above average and the economy slowing during first quarter of 2015, our championship game comes down to earnings and technicals. Based on our assessment of these four factors, we expect stock market investors will be “cutting down the nets” due to potential mid- to-high-single-digit stock market gains in 2015.
The Dollar's Ripple Effect
by Burt White of LPL Financial,
In technical analysis, “intermarket analysis” looks at the way in which various markets interact. Intermarket analysis primarily looks at four market sectors: currencies, commodities, bonds, and stocks. From a technical analyst’s perspective, focusing our attention on only one market without considering what’s happening in the others leaves us in danger of missing vital directional clues and potential profits. The dollar, which has appreciated 24.4% since June 30, 2014 (as of March 19, 2015), has had an unusually strong intermarket effect of late.
Happy Birthday Bull Market
by Burt White of LPL Financial,
The current bull market celebrates its sixth birthday today (March 9, 2015). Bull markets do not die of old age, they die of excesses, and we do not see evidence of excesses emerging today. Some of our favorite leading indicators suggest the economic expansion and bull market may continue through the end
of 2015.
Another Bubble?
by Burt White of LPL Financial,
The Nasdaq Composite just hit 5000 today as this report was going to press and is nearing its all-time record closing high of 5048. Even with the Nasdaq at 5000, we do not believe stocks have reached bubble territory. The Nasdaq has a much stronger foundation today of valuations, profits, and sentiment.
Are Expectations Too High?
by Burt White of LPL Financial,
The market’s continued ascent has caused some to ask if the stock market reflects excessive optimism. The pace of economic surprises as measured by the Citigroup Economic Surprise Index suggests expectations remain reasonable. We view recent economic disappointments as largely temporary, and would expect the surprise index may reverse recent declines as expectations have come down, providing support for cyclical sectors.
Energy Sector Outlook: What We Are Watching
by Burt White of LPL Financial,
No sector is getting more attention right now than energy. Market participants are attracted to the potential upside after both oil and the energy sector suffered substantial declines in recent months. Many see the sector as cheap, something that is not easy to find these days in the U.S. equity market. We drive by gas stations every day where we see prices have been cut in half, serving as a constant reminder of how cheap oil is. In this commentary, we discuss what we are watching to assess the opportunity in energy.
Earnings Season Highlights and Lowlights
by Burt White of LPL Financial,
In this commentary we look at some of the highlights and lowlights of fourth quarter
earnings season. Despite the massive drag from the energy sector and the negative impact of a strong U.S. dollar, fourth quarter 2014 earnings are on track to exceed prior estimates. We maintain our 5?-?10% earnings growth forecast for 2015* and believe cheaper energy costs will help us get there.
Don't fret about January effect
by Burt White of LPL Financial,
The stock market fell in January, causing some to ask whether the so-called January effect means that stocks will fall this year. Recall less than four weeks ago the “first five days” indicator sent a positive stock market signal for 2015. We always put fundamentals first when forecasting stock market direction—and on that score, we believe stocks still look good.
No Deflating the U.S. Dollar
by Burt White of LPL Financial,
The latest leg up for the U.S. dollar has been driven by anticipation and arrival of QE by the ECB. The dollar has been strong for a number of reasons, all of them good things. Though not the end all and be all, currency is an important consideration when determining asset allocation.
European Head Fake?
by Burt White of LPL Financial,
The much anticipated European Central Bank (ECB) policy meeting this week may include a quantitative easing (QE) program announcement. Although we would view a potentially bold QE program from the ECB as an incremental positive, the ongoing growth and deflation challenges in Europe leave us still with a strong preference for the U.S.
A Tale of Two Earnings Seasons
by Burt White of LPL Financial,
The fourth quarter of 2014 will be a tale of two earnings seasons: the best of times and the worst of times. Despite a substantial drag from the energy sector, we expect another good earnings season overall. We expect more winners from cheap oil than losers, although the energy sector faces significant challenges.
Will Shoppers Bring Holiday Cheer for Markets?
by Burt White of LPL Financial,
We expect holiday shoppers, bolstered by lower energy prices, to help support potential stock market gains. Although the severity of the oil price decline has been unsettling, we view the decline as positive for U.S. consumers overall. Retail stocks should deliver some cheer for markets this holiday season, but dont stuff those stockings with too much of them.
Favorable Policy Environment for Stocks in 2015
by Burt White of LPL Financial,
We expect the policy environment in 2015 to be supportive for stocks. The transfer of power to Republicans may have a meaningful impact on broad policy measures. Regardless of the political party in power, the year before the presidential election has historically been a good one for stocks.
Can Stocks Deliver the Goods in 2015?
by Burt White of LPL Financial,
We believe stocks will deliver mid- to high-single-digit returns in 2015. We expect earnings, and not valuations, to do the heavy lifting in producing potential stock market gains for investors in 2015. Monetary policy is in transit in 2015, when stocks will face a shift from the very loose monetary policy of the Federal Reserves (Fed) quantitative easing (QE) program to an environment in which the Fed begins to hike interest rates.
Emerging Markets Opportunity Still Emerging
by Burt White of LPL Financial,
We believe emerging markets (EM) fundamental conditions are set for improvement in 2015, based on our outlooks for economic growth, earnings, and policy. Valuations are compelling and EM may be situated to recapture some of their relative losses from a technical perspective, particularly in Asian markets. However, somewhat mixed fundamental and technical pictures suggest a better opportunity may be forthcoming
Corporate Calm
We remain confident in corporate Americas ability to generate solid earnings growth in the current global economic environment despite the slowdown in Europe (and to a lesser extent, China). A number of U.S. companies have performed relatively well in Europe, with some not yet seeing signs of a slowdown in their business. The business environment overseas appears to be good enough for companies to largely maintain their outlooks for the rest of the year and into 2015.
Oil Hits the Skids
by Burt White of LPL Financial,
We believe the oil sell-off is overdone and expect the commodity to find a floor in the low $80s. We expect firming global growth to increase the markets confidence in global oil demand despite weakness in Europe. Energy service stocks are particularly oversold and may be attractive as the services-intensive U.S. energy renaissance continues.
Pullback Perspective
by Burt White of LPL Financial,
We see the recent increase in volatility as normal within the context of an ongoing bull market. We do not believe the age of the bull market, at more than 5.5 years old, means it should end. We maintain our positive outlook for stocks for the remainder of 2014 and into 2015.
Dont Fight the ECB? Part 2
by Burt White of LPL Financial,
Last week we discussed why buying European stocks now, following the recent stimulus announced by the ECB, is very different from buying U.S. stocks during periods of Fed stimulus in recent years. This week we take a deeper dive into the investment opportunity in Europe and evaluate fundamentals, valuations, and technicals. We recommend that investors fight the ECB. We do not believe the additional stimulus is enough for us to recommend European equities over U.S. equities at this time.
Back to School With the Three Rs: Revenues, Reinvestment, and Renaissance
We believe the three Rs are keys to the outlook for the stock market: revenues (and profits), reinvestment, and the renaissance in manufacturing. We expect stocks to garner support from these three Rs in the form of continued growth in revenues and profits, more corporate reinvestment, and continued steady gains for the U.S. manufacturing sector.
Midterms May Mean More Gains for Stocks
With the midterm elections now just two months away and campaigning starting to heat up, we thought we would share our current views on the political landscape and what it may mean for U.S equities. In our two Outlook 2014 publications for this year, we posited that the U.S. economy and corporate profits may drive the stock market higher and investors could turn their attention away from policymakers in Washington, who were such a distraction in 2013 and earlier in the current economic expansion.
Results 51–94
of 94 found.