Publications, Insights, & News

If you ask an economist what makes them toss and turn at night, chances are they’ll tell you, “Fear of missing the warning signs of a recession.” After all, for anyone who studies the economy for a living, few things could be worse than a sudden economic slump catching you by surprise. That’s why many economists rely on certain indicators to predict if there’s rough weather ahead. Historically, one of the most reliable indicators is the inverted yield curve. This is when the yield on long-term bonds drops below the yield on short-term bonds. Why does this matter to economists? Because an inverted yield curve has preceded every recession since 1956...

Welcome to the updated LPL Research Weekly Market Commentary! This redesign incorporates the cleaner, more streamlined look you requested along with our informed insights on what’s happening in the markets now. As a bonus, each week you’ll also be able to link directly to our new Weekly Market Performance, which reviews top equity and fixed income indexes. We hope you like the new format and that you’ll continue to let us know what you want—and don’t want—from your LPL Research team. Thank you for your business. — John Lynch...

China has introduced a new weapon to use in the trade war with the United States. That weapon? Its own currency. On Thursday, August 1, President Trump proposed a new slate of tariffs on Chinese goods. In response, the Chinese central bank devalued its currency – the yuan – to more than seven to the dollar. (That means that one U.S. dollar would buy you over seven Chinese yuan.) ...

August has been one of the worst months for the stock market historically. In fact, it has been the worst month on average for the past 10 years, with the S&P 500 Index down an average of 0.78% for that month [Figure 1]. Last week’s 3.1% slide for the index certainly fit that pattern, which begs the question whether investors should buckle up for more seasonal losses this month. Despite last week’s losses, 2019 has been a good year for stocks—the S&P 500 is up 17% year to date through August 2 and, excluding any losses Monday, still stands just 3% from its all-time closing high on July 26. Here we summarize August’s lackluster track record and discuss whether this August will fit the pattern.

The Federal Reserve (Fed) is likely to start an easing cycle this week, which has several investment implications. We have written a fair amount about the Fed’s U-turn in policy stance this year, including last week’s Weekly Market Commentary. That reversal from raising rates to presumably lowering them will become a reality if the Fed cuts rates at this week’s policy meeting, which concludes on Wednesday, July 31. Here we look at some potential asset allocation implications from this monetary policy transition.

The S&P 500 Index is very close to our year-end target of 3,000. The S&P 500 is up nearly 20% year to date and, after first closing above our year-end fair value target range July 12, it now stands less than 1% from our target [Figure 1]. Now that we’ve reached our target, is it time to sell? Here we provide some context for our stock market forecast to help explain why we haven’t raised our fair value target or recommended investors reduce their equities allocations.