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Second Quarter Earnings Season Update

Amid the barrage of nearly constant economic and market data, nothing is more important to assess the health of corporate America than the quarterly check-in that we affectionately call earnings season. As earnings season approaches its halfway mark, it’s a good time to take a look at what we’ve learned so far.

Weekly Economic Commentary

Only nine times in over 14 years have the FOMC meeting, GDP report, ISM report, and the employment report — all often marketmoving events — occurred in the same week. Historically, these weeks have exhibited 20% more volatility than an average week over this time span, as measured by the S&P 500 Index. This week is unlikely to be just another boring midsummer week for financial market participants.​

Current Conditions Index 7/23/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

Modest-to-Moderate Economic Growth Continues 7/21/14

The latest edition of the Fed’s Beige Book indicates that the negative headwinds that have held the U.S. economy back over the past seven years may be declining. The rebound in our Beige Book Barometer over the past several months is consistent with the Fed’s view that the drop in economic activity was mostly weather related. Despite the recent barrage of bad news, optimism on Main Street remains high...​

Is Congress Contemplating QE4?

If a tax holiday is enacted and the repatriated funds by multinational corporations are used to buy back shares or retire debt, it could potentially act as a very potent market stimulus equivalent to the height of the Fed’s QE3.

Municipal Mid-Year Outlook

We do not expect the municipal bond market to repeat first half strength over the second half of 2014. A gradual rise in yields to compensate for better growth, a modest rise in inflation, and the start of Fed rate hikes in roughly one year’s time will likely pressure bond prices slightly lower through year end. We continue to believe the taxable bond market is likely the main catalyst to the next move in municipal bond prices.

Counting Down the Months

A common worry among investors is that the stock market may fall as the Fed gets closer to hiking rates. In fact, the S&P 500 has posted a gain in the 12 months ahead of the first rate hikes over the past 35 years.

Gauging Global Growth in 2014 and 2015

Global GDP growth in 2014 remains on track to accelerate versus 2013’s pace, excluding the impact of the weather. The pace of growth in the global economy is a key driver of global earnings growth, and ultimately, the performance of global equity markets. In our view, markets may already be looking ahead to the second half of 2014, and especially the third quarter, to gauge the true underlying pace of global growth.

Portfolio Compass 7/9/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Current Conditions Index 7/9/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

Earnings Season: A Show About Nothing

Much like the television comedy Seinfeld, which celebrated its 25th anniversary this past Saturday, July 5, 2014, the second quarter earnings season is likely to be “a show about nothing.”

Disconnect?

We continue to expect that U.S. economic growth may rebound to a 3% pace for all of 2014. The June 2014 jobs report was undeniably strong on all fronts, standing in sharp contrast to the weak performance of the economy in the first quarter of 2014. The last time the economy created at least 200,000 jobs per month for five consecutive months was in late 1999 through early 2000, when the U.S. economy was growing between 4.5% and 5.0%.

Current Conditions Index 7/2/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

A Challenging Second Half Looms

After broad based strength over the first half of 2014, we expect yields may rise in the second half of 2014 as global growth strengthens and inflation picks up from recent lows. Higher valuations have increased the challenges facing investors.

Investor’s Almanac Field Notes

Similar to a farming almanac, our Investor’s Almanac is a publication containing a guide to patterns, tendencies, and seasonal observations important to growing. The goal of farming is not merely to grow crops, but to sustain living things — investing shares the same goal.

LPL Financial Research's Mid-Year Outlook 2014

At this year’s halfway point, we offer the LPL Financial Research Mid-Year Outlook2014: Investor’s Almanac Field Notes containing key observations and updates to our outlook for 2014.

Understanding Your Retirement Income Replacement Ratio

Although the term retirement income replacement ratio sounds formidable, it’s actually a simple, understandable concept that doesn’t require any fancy math. The ratio helps you zero in on your retirement savings goal and periodically measure your progress as you move toward your target. Will you need 60%, 75%, 90% or even 100% of the income you have in your last year of work to maintain a desirable standard of living after you retire?

World Cup and World CPI Are Heating Up, Risking Mistakes by Key Players

Just as the World Cup has been heating up, increasing the risk of player mistakes, the world consumer price index (CPI) has also been heating up, complicating the task for policymakers at the world’s central banks and increasing the risk of mistakes that could have market implications.

Portfolio Compass 6/25/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Current Conditions Index 6/25/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

Behind the Curve?

Despite the Fed labeling the recent inflation increase as “noise,” longer-term bond yields rose, inflation expectations increased, and the yield curve steepened — all signs of the bond market pricing in inflation risks. As the low inflation pillar of year-to-date bond strength fades, it may be one more reason to be cautious in the bond market.

USA $17.1 Trillion | GER $3.8 Trillion

The U.S. economy is poised to outperform Germany in the years ahead thanks to better demographics, better productivity, and a more focused central bank. Today the U.S. economy is in far better shape than the German economy. Advantage U.S.A.

Current Conditions Index 6/18/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

Bond Market Perspectives

We believe bank loans could be one of the more attractive fixed income asset classes based on our economic and market outlook for the second half of 2014 and believe recent negative headlines are misplaced. A still low interest rate environment, a growing economy, and strong demand for floating rate debt have all fueled growth in the bank loan market.

Emerging Opportunity

Emerging market stocks have now pulled ahead of the performance of the S&P 500 Index for 2014, which may finally mark the beginning of the turn for EM relative performance.

FOMC: Need to Know

We continue to expect the Fed to trim QE by $10 billion per month this year and to remain on pace to exit QE by the end of 2014. Our view remains that the current center of gravity at the FOMC will likely err on the side of keeping rates lower for longer. Markets should expect that the Fed will be content with keeping its fed funds rate target near zero until key labor market indicators make significant progress toward “normal.”

Current Conditions Index 6/11/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

Portfolio Compass 6/11/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Central Bank World Cup

Strong economic data has weighed on bonds to start June but favorable yield differentials between Treasuries and European government bonds have helped limit the domestic bond weakness. Divergent central bank policies may still mean bonds yield to growth.

Who Are the Buyers and Sellers?

At the heart of it, all markets come down to buyers and sellers. Taking a look at who is buying and who is selling can tell us something about the durability of the market’s performance and what may lie ahead.

Modest-to-Moderate Economic Growth Continues

The latest edition of the Fed’s Beige Book indicates that the negative headwinds that have held the U.S. economy back over the past five years may be declining. The rebound in our Beige Book Barometer is consistent with the Fed’s view that the contraction in economic activity was mostly weather related. We continue to expect...

Current Conditions Index 6/4/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

Irrepressible Bonds

Investor positioning and changed Federal Reserve expectations had a particularly beneficial impact on robust bond market performance in May. Unbalanced investor positioning may have run its course, and investor expectations about the Fed may be as good as it gets.

No Debate: Stock and Bond Markets Agree

No debate here: Over the past five years, modest declines in bond yields in the range of 0 – 50 basis points occurred along with modest gains of 0 – 10% for stocks.

Better Gauges of Global Growth Ahead

As markets brace for this week, we continue to expect that the U.S. and global economies may accelerate in 2014 relative to 2013’s growth rate. We continue to expect that the FOMC will taper QE by $10 billion per meeting, exit the program by the end of 2014, and begin to raise interest rates in late 2015. Our view remains that...

Portfolio Compass 5/28/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Current Conditions Index 5/28/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

Oil, Oil Everywhere

Why — if the United States is producing more oil and consuming less than it was a decade ago — is the price of oil going up, and what does it mean for investors?

Capital Spending Check-up

We do not think the economic weakness in Q1 is the start of another recession, and, indeed, we continue to expect real GDP will expand 3.0% in all of 2014. We believe the conditions are in place for a pickup in business spending, and we expect the pace of business capital spending to accelerate over the next several years.

Municipals Bloom Amid Drought

Limited new issuance and Treasury market strength have powered municipal bonds to their best start since 2009. In conjunction with lower yields and higher valuations, near-term caution may be warranted as the first signs of selling pressure emerge and a challenging seasonal period looms. Absent a new bout of economic weakness, we see additional municipal price gains as limited.

Snapback

We do not think the first quarter GDP report will be a harbinger of a recession in the near future. We continue to believe the U.S. economy will accelerate in 2014 (relative to 2013), and that GDP will increase 3.0% for the year. The LEI indicates that the risk of recession in the next 12 months is negligible at 4%, but not zero.

Japan Going Godzilla

If Godzilla-sized quantitative easing aligns with a fading impact from recent tax hikes, increasing political support for corporate tax cuts, and a push by government pension funds into stocks, it may mean a blockbuster summer for Japanese stocks.

Investing Through Life’s Stages

Read this simple guide on how to get started in investing and how to reassess your investment strategies through multiple life changes.

Portfolio Compass 5/14/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Current Conditions Index 5/14/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

Slim Pickings

Bond market strength in 2014 has led to more expensive valuations across the bond market, not just in Treasuries. Narrow yield spreads by themselves do not imply a pending market correction and spreads can stay narrow for a long time. However, after a strong start to 2014, lower yields in combination with narrower yield spreads illustrate the lack of opportunity in the bond market.

The Best Indicator May Be a Long Way From Signaling the Start of a Bear Market

The volatility we call “market storms” is likely to continue to be a characteristic of markets this year, caused by well-known factors, such as: geopolitical conflict in Russian border countries, slower economic growth in China, or a weak start to the year for the U.S. economy, among others, but also lesser-known factors like the Oklahoma earthquakes, solar flares disrupting communications, and the Ebola outbreak...

Dollar on the Verge?

While the dollar may gain ground in the coming months and quarters as the economy accelerates, we continue to believe the dollar will slowly depreciate over time — continuing the trend that has been in place since the early 1970s. The weaker dollar has, at the margin, made our exports more attractive, pushed up the costs of goods we import, and, most importantly...

Current Conditions Index 5/7/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

The New Conundrum

Several factors, led by short covering, pushed bond prices higher in the face of stronger economic data last week. Like the Greenspan conundrum of 2005, we expect an improving economy and the eventual onset of Fed rate hikes to gradually push bond yields higher.

Global Earnings Picture Reveals Dramatic Regional Differences

Earnings forecasts are being cut sharply overseas, raising the questions of how much of a value international developed market stocks are and whether they can outperform the U.S. market in 2014.

Central Bank Pulse

Key emerging market central banks have raised rates within the past year in an effort to combat inflation, the threat of inflation, or current account imbalances. Most developed market central banks are on hold or easing. The divergence among global central bank policies creates both risks and opportunities for global investors, and especially active managers who invest globally.

Portfolio Compass 4/30/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Current Conditions Index 4/30/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

One Year Later

The broad bond market has almost fully recouped the damage done from the 2013 selloff with some sectors having fully recovered. We do not expect a repeat of 2013, but the rebound in bond prices, higher valuations, and lower yields have created new challenges that may lead to lower returns.

Run for the Roses

The animal spirits of business leaders and investors may be re-emerging, resulting in more investment that may herald better growth.

Mid-Spring Surprise

Only eight times in over 14 years have the FOMC meeting, GDP report, ISM report, and the employment report — all often market-moving events — occurred in the same week. Historically, these weeks have exhibited 20% more volatility than an average week over this time span, as measured by the S&P 500 Index. This week is unlikely to be just another boring mid-spring week for financial market participants.​

Current Conditions Index 4/23/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

The Big Bang Theory: Inflating the Stock Market

It does not take a Ph.D. to see that we may be witnessing a big bang in inflation, but the early stages of accelerating inflation have been historically good for the economy and stock market.

Beige Book: Window on Main Street

Weather was again a key theme in the Beige Book with 103 mentions, down from 119 in March. However, the mentions in April were in a much less negative context than in March. The Affordable Care Act continues to be a key concern for Main Street.

Kids & Money: Nurturing Your Child’s Financial Growth

Most kids learn the basics of money and making change in elementary school, but probably won’t learn how to manage money unless they choose finance as a career path. That means it is up to all of us to see that our children reach adulthood prepared to face life’s fiscal challenges.

Portfolio Compass 4/16/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Current Conditions Index 4/16/14

Read real-time insight into the trends that shape LPL Financial Research’s recommended actions to manage portfolios, it has proven to be a useful investment decision-making tool.

Mixed Messages

The market-friendly overtures from the Fed may help keep bond yields in the current low range, but much of the good news from the Fed is already priced into the bond market. Investors may be more willing to downplay Fed news and refocus on economic data, which will ultimately drive the Fed’s decisions. Breaking out of the yield range now will likely depend on improving economic data over the next several weeks.

The Weakest Earnings Cycle in 55 Years

This has been the weakest earnings cycle in 55 years. Earnings growth needs to improve to support valuations and drive the stock market higher. Fortunately, growth may be set to improve in the coming quarters.​

Gauging Global Growth in 2014 & 2015

The stabilization in growth forecasts for both 2014 and 2015 is a sign that perhaps the market is more confident now that the global economy is in the middle innings of an expansion. While the forecasts for GDP growth for 2014 and 2015 have generally moved higher for developed economies over the past 18 months, growth estimates for emerging market economies have generally moved lower.

The Future According to the Bond Market

At any given time, current bond market pricing may provide a view of future economic growth, interest rates, inflation, and when the Federal Reserve (Fed) may raise interest rates, how fast, and by how much. The low level of longer-term bond yields, a flatter yield curve, and subdued inflation expectations all could signal a sluggish economic environment. Bond market indicators do not always come to fruition and taking a contrarian view from future indications may provide opportunities.

Current Conditions Index 4/9/14

The CCI is a weekly measure of the conditions that underpin our outlook for the markets and economy. It provides real-time insight into the trends that shape our recommended actions to manage portfolios and has proven to be a useful investment decision-making tool.

Jobs Looking for People Redux

The JOLTS data continue to tell a familiar story: the labor market is healing, but it still has a long way to go to get back to normal. Looking around the country at open jobs by industry, firm size, and pay, it seems like a good time to be a business and professional services worker in the South looking for work in a small-to-medium sized (50 to 249 employee) business.

Surprise: Cyclicals May Soon Come Back

The very tight relationship between economic surprises and the performance of cyclicals suggests cyclicals may soon make a comeback relative to more defensive sectors.

Current Conditions Index 4/2/14

The CCI is a weekly measure of the conditions that underpin our outlook for the markets and economy. It provides real-time insight into the trends that shape our recommended actions to manage portfolios and has proven to be a useful investment decision-making tool.

Portfolio Compass 4/2/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

No Fooling, Good Quarter for Bonds

Bond prices rose across the board following a difficult 2013 and yields fell, with the 10-year Treasury yield closing the first quarter 0.3% lower. At a 1.8% quarterly return for the Barclays Aggregate Bond Index, the pace of bond performance is unsustainable, and we continue to suggest a defensive posture against rising interest rates in the bond market with an emphasis on more economically sensitive sectors.

Is the Party Over?

At any given time, there are always some bubbly valuations among industries and stocks that are hot. But overall, looking at valuations, the party in the stock market may not be just getting started — but it is not yet close to being over.

Labor Market Report Card

Weather will still be a factor in the March employment data & the markets may give the economy another “free pass” for yet another potentially weak jobs report. In our view, the Fed would have to see a sharp slowdown (less than 50,000 jobs per month) or ramp up (over 300,000 jobs per month) to slow down or speed up tapering before fall 2014.

Current Conditions Index 3/26/14

The CCI is a weekly measure of the conditions that underpin our outlook for the markets and economy. It provides real-time insight into the trends that shape our recommended actions to manage portfolios and has proven to be a useful investment decision-making tool.

Giving Credit to High-Yield Credit

High-yield bond valuations remain elevated for a good reason — strong credit quality and low defaults continue to support the sector. A closer look at underlying credit quality indicates high-yield bond prices may remain well-supported for most of 2014. We still find lower-rated high-yield bonds and bank loans offering some attractive opportunities in the bond market for 2014.

What Is Priced In?

The stock, bond, and commodities markets appear to have priced in a return to a positive environment for investors consisting of stronger economic and job growth accompanied by a return of some mild inflation.​

What’s the Yellen Surprise?

The Fed’s target for the fed funds rate in the long term is lower than in prior rate hike cycles. The market has already priced in Fed rate hikes beginning in mid-2015. Sustained growth in real gross domestic product (GDP) above 3.0% at any time over the next three years could elicit an earlier start to rate hikes by the Fed and/or more rate hikes once they commence. The Fed’s communication with investors and the public remains muddled, at best.

Portfolio Compass 3/19/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Current Conditions Index 3/19/14

The CCI is a weekly measure of the conditions that underpin our outlook for the markets and economy. It provides real-time insight into the trends that shape our recommended actions to manage portfolios and has proven to be a useful investment decision-making tool.

Fed Reacquaintance

Unlike weather-impacted economic data or geopolitical tensions, the Fed is likely to reiterate its gradual journey to less bond market-friendly policy. A change in the Fed’s forward guidance to more qualitative measures may pressure bond prices lower and yields higher as the bond market prices in uncertainty.​

March Madness in the Markets

As the NCAA basketball tournament gets down to its own sweet sixteen while the rest of March plays out, it is a good time to reflect on the sixteen competing drivers of the markets that may make for an exciting showdown in the weeks and months to come. There will likely be some upsets that result in volatility as these factors face off against each other.

Making a Statement

Markets will soon be asking: When will the Fed raise rates? What measures of inflation, employment, and other economic indicators will the Fed be watching most closely? How fast will rates rise once rate hikes begin? We expect the FOMC to revamp its overly complex statement beginning at this week’s FOMC meeting. We continue to expect the FOMC to taper quantitative easing by $10 billion at each FOMC meeting this year.

Current Conditions Index 3/12/14

The CCI is a weekly measure of the conditions that underpin our outlook for the markets and economy. It provides real-time insight into the trends that shape our recommended actions to manage portfolios and has proven to be a useful investment decision-making tool.

Beware the Ides of March

The month of March has historically been difficult for bond investors. Given the good start to the bond market so far in 2014, bond investors should be aware of seasonal factors that may negatively impact bond performance.

Keeping Up With Your IRA: Tax Season Tips

If you’re one of the millions of Americans who owns either a traditional individual retirement account (IRA) or a Roth IRA, then the approach of tax season should serve as a reminder to review your retirement savings strategies and make any changes that will enhance your prospects for long-term financial security. It’s also a good time to open an IRA if you don’t already have one.

Europe’s Big Bet

The ECB made a big bet last week that the Eurozone economy is picking up fast enough to avoid the need for any further stimulus. We are not so sure. Until some key catalysts emerge, the risks to stocks in Europe may outweigh the rewards.

Still Growing, With Limited Wage and Price Pressures

In early 2014, harsh winter weather has replaced policy uncertainty as the biggest weight on the economy. Our Beige Book Barometer decreased to +62 in March 2014 from +76 in January 2014, as weather received 119 mentions. The Affordable Care Act continues to be a key concern for Main Street.

Portfolio Compass 3/5/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Current Conditions Index 3/5/14

The CCI is a weekly measure of the conditions that underpin our outlook for the markets and economy. It provides real-time insight into the trends that shape our recommended actions to manage portfolios and has proven to be a useful investment decision-making tool.

Weather and Treasury Yields

We expect uncertainty over the true trajectory of the economy to keep Treasury yields range bound over the near term. We believe investors should remain on guard for the unwinding of weather-related impacts, which may push bond prices lower and yields higher. The predominant impact following colder and snowier winter weather was higher yields in 2010, 2007, and 1996.

Stocks Go From Great to Good as the Bull Turns Five

After five years, the second most powerful bull market in post-WWII history may be getting a second wind...​

Janet Yellen’s Employment Report

The market will be especially interested in the unemployment rate this month, because just a 0.1% drop to 6.5% pushes the rate to the Fed’s threshold of 6.5%. Yellen made it clear last week that the Fed was in no hurry to raise rates when the unemployment rate crosses the 6.5% threshold. In our view, the Fed is not likely to raise rates until late 2015 or even early 2016.

Current Conditions Index 2/26/14

The CCI is a weekly measure of the conditions that underpin our outlook for the markets and economy. It provides real-time insight into the trends that shape our recommended actions to manage portfolios and has proven to be a useful investment decision-making tool.

Weather Exhaustion

A burgeoning divergence between Treasury yields and economic data suggests the bond market is looking forward to spring and a clearer read of the economic data free of weather distortions. The bond market is also acknowledging the Fed remains on a slow course to remove accommodation that is not adequately reflected in today’s prices and yields.

The Real Reason for the Rebound

The idea of a change in Congress to a more business-friendly environment may be a welcome thought for many market participants and a behind-the-scenes reason for the rebound.

Residential Recovery Redux

Almost all of the factors supporting an ongoing recovery in housing remain in place, but the rise in rates will likely slow the pace of the recovery somewhat. Many, if not all, of the other housing indicators we watch also suggest ongoing recovery in the housing market in the quarters and years ahead.​

Portfolio Compass 2/19/14

A snapshot of LPL Financial Research’s views on equity & alternative asset classes, the equity sectors, and fixed income.

Current Conditions Index 2/19/14

The CCI is a weekly measure of the conditions that underpin our outlook for the markets and economy. It provides real-time insight into the trends that shape our recommended actions to manage portfolios and has proven to be a useful investment decision-making tool.

Lies, More Lies, and Charts

One of the reasons that charts forecasting an imminent stock market “crash” are able to make their way around the internet almost every year is that charts can lie.

The Inflation Conversation: Part 2

When policymakers say there is no inflation, they mean the rate of change in the general price level, or the inflation rate, is moderate. Quality adjustments and definitions are two of many reasons for the apparent disconnect in “the inflation conversation.” For policymakers like the Fed, the low rate of increase in the inflation rate expected by the FOMC this year (1.5%) and next year (1.75%) suggests that inflation is “well contained.”

Maintain a Good Credit Rating

For better or for worse, the American way of financial life relies on debt as a way of solidifying a desired lifestyle. Therefore, it is important to establish a good credit history if you intend on making more substantial, debt-financed purchases in the future.

Add More Bond — James Bond — to Your Portfolio

50 years ago, in the James Bond movie Goldfinger, an alternative to the traditional car helped Bond out of some risky situations. 50 years later, bonds are facing a risky situation — and alternatives to traditional investments may help to capitalize on it.

The Inflation Conversation: Part 1

At her first public appearance as Fed chairwoman tomorrow, Janet Yellen is likely to say that inflation is in more danger of falling below the Fed’s target of 2% than accelerating higher. Market participants’ view of inflation is similar to the Fed’s view that inflation remains well contained.

Developing Worries

Uncertainty over emerging market (EM) weakness and whether the weather is truly responsible for recent softness in economic data is likely to keep bond yields range-bound over the near term. We believe the U.S. economy will resume the improvement that began in late 2013 and EM growing pains will not impact broader financial markets over the longer term.

Turn Down the Volume

It is not unusual to see the market dip 3% in a month; what was unusual about January’s stock market trading was the volume surging to levels not seen since May 2010. Such spikes have historically coincided with losses, but they were not sustained for long.

The Employment Situation: Slow Climb Back

The January 2014 employment report will garner plenty of attention from market participants, the media, and the public as the labor market continues its slow climb back to the pre-recession peak. The Federal Reserve will be watching for key metrics: the participation rate, long-term unemployment, wages, and hiring..

Current Conditions Index 1/29/14

Over the past week, the LPL Financial Current Conditions Index (CCI) slid to 225. The CCI has been more volatile in recent weeks. The path of the CCI suggests modest, but steady economic growth in the United States...

Sentiment & Positioning

Positioning and sentiment-related buying and selling are not the only drivers of the bond market, but when coupled with fundamental drivers, they can be a potent combination. Bond investors may refocus on economic data now that positioning and sentiment appear more balanced...

Time to Hit the Pause Button?

This week (January 27 – 31, 2014) the Federal Reserve’s (Fed) policymaking arm, the Federal Open Market Committee (FOMC), holds the first of its eight meetings this year. The meeting is being held against the backdrop of a wave of volatility in global financial markets, as market participants brace for another round of tapering by the FOMC...

Investor’s Guide to the 2014 State of the Union Address

President Obama’s State of the Union (SOTU), scheduled for Tuesday, January 28, is unlikely to be a big market mover. But three areas of the market may see some impact...

A Clean Slate: Review and Rebalance Your Portfolio

There is no better time to take a fresh look at your investment strategies than the beginning of the new year. And while there is no one-size-fits-all approach to investing for the future, reviewing your goals annually can help you stay on track from month to month--and year to year.

It Pays to Plan Ahead: 2013 Year-End Tax Planning

As 2013 draws to a close, the last thing anyone wants to think about is taxes. But if you are looking for potential ways to minimize your tax bill, there’s no better time for planning than before year-end. And, with the higher rates put in place with the passage of the American Taxpayer Relief Act of 2012, being tax efficient is more important than ever.

An Estate Planning Checklist

Because you have worked hard to create a secure and comfortable lifestyle for your family and loved ones, you will want to ensure that you have a sound financial strategy that includes trust and estate planning. With some forethought, you may be able to minimize gift and estate taxes and preserve more of your assets for those you care about.

The Yield Ascent Slows

The sharp increase in bond yields that started during the second quarter of 2013 moderated during the third quarter. Bond weakness subsided late in the third quarter, following one of the worst sell-offs of the last 20 years. From trough to peak, the benchmark 10-year Treasury yield increased by 1.4% from early May to early September with higher yields rippling across all bond market sectors...

Current Conditions Index 10/30/13

Over the past week, the LPL Financial Current Conditions Index (CCI) fell to 229. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI is roughly in line with its 52-week average suggesting continued, though modest, growth...

The New Normal Was the Old Normal

Five years ago, the phrase “the new normal” began to be coined to describe the investment environment of the years that were to follow. Prognosticators claimed the new normal of the future was likely to include a lowered living standard, high unemployment, stagnant corporate profits, heavy government intervention in the economy, and disappointing stock market returns...

FAQ - Federal Open Market

Will the Fed announce tapering at this week’s FOMC meeting? Why is the Fed not likely to taper at this week’s FOMC meeting? How has the economy evolved since the last FOMC meeting in mid-September 2013? Find out answer to these questions and more...

Portfolio Compass 10/23/13

Compass Changes: Upgraded stocks to neutral from negative/neutral. Downgraded cash to neutral from positive/neutral. Downgraded large growth to neutral from neutral/positive. Downgraded large value to negative/neutral from neutral. Upgraded small growth and small value to neutral/positive from neutral. Investment Takeaways: We expect...

Current Conditions Index 10/23/13

Over the past week, the LPL Financial Current Conditions Index (CCI) rose to 238. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI is roughly in line with its 52-week average suggesting continued, though modest, growth...

Municipal Ups and Downs

We continue to find municipal bonds one of the more attractive sectors in the bond market even after a modest pullback to start the fourth quarter of 2013. Over the first half of October, selling pressure has increased as investors used September gains as a reason to exit the municipal bond market following the spring and summer 2013 sell-off...

Back to Work

The budget crisis in Washington is over — for now. The 11th hour deal lifts the debt ceiling through February 7, 2014, and funds the government though January 15, 2014, returning furloughed overnment workers to their jobs. The bill passed both the Senate and the House by a wide margin and on bipartisan support. But what about early next year — are we going to have to go through the same fiscal fight again?

The Lowdown on the Shutdown

With the shutdown and debt ceiling debate now in the rear view mirror, the market’s attention — and possibly the Federal Reserve’s (Fed) as well — will likely shift to the performance of the private sector economy here in the fourth quarter of 2013 and in the first quarter of 2014. We continue to expect around 2.0% growth in real Gross Domestic Product (GDP) in 2013, despite the drag from government spending...

Current Conditions Index 10/16/13

Over the past week, the LPL Financial Current Conditions Index (CCI) slid slightly to 225. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI is roughly in line with its 52-week average suggesting continued, though modest, growth...

Liquidity: You Don’t Miss It Until It’s Gone

Liquidity may pose a challenge to the bond market in the form of: 1) more volatile interest rate movements; and 2) greater swings in lowerrated or more economically sensitive bonds. We view near-term liquidity risks as manageable and remain focused on more credit-sensitive sectors such as bank loans and high-yield bonds...

The Six Trends to Watch This Earnings Season

The continued wrangling by lawmakers over the government shutdown and debt ceiling may overshadow earnings reports this week in drama, but not in importance. While Washington drives market volatility, the market trend is determined by earnings growth. It is hard to draw conclusions from the handful of results in the...

Gauging Global Growth in 2013 & 2014: Stability

If the U.S. government remains shut down, news from corporate America on the health of the U.S. and global economies may take on even greater significance than usual for market participants and policymakers in the coming weeks. The stabilization in growth forecasts for 2014 is a sign that perhaps the market is much more confident now that the global economy is in the middle innings of an expansion. It’s a healthy sign for global growth prospects that...

Changing Jobs or Retiring? Don’t Forget Your Retirement Savings!

If you’re like many Americans, you probably intend to rely on your employer-sponsored retirement plan savings for a significant portion of your retirement income. So when it comes time to make important decisions, such as what to do with the money in your plan when you change jobs or retire, you should be fully aware of your options...

Portfolio Compass 10/9/13

Compass Changes: No changes. Investment Takeaways: We expect the S&P 500 Index to grind higher in the second half of the year with increased volatility.* ƒƒWe favor U.S. stocks relative to emerging markets (EM) and developed foreign, despite the ongoing debacle in Washington. ƒƒWe continue to favor the more U.S.-focused, consumer-oriented sectors including consumer discretionary and health care...​

Current Conditions Index 10/9/13

Over the past week, the LPL Financial Current Conditions Index (CCI) slid slightly to 230. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI is now in line with its 52-week average, suggesting continued, though modest, growth. A rise to around 250 would be consistent with stronger-than-average growth.

Who Buys When the Fed Does Not?

Who will step in to fill the void once the Federal Reserve (Fed) decides to exit the bond market? This is the persistent question on investors’ minds even after the Fed decided to postpone tapering, or reducing, bond purchases this past September. Investors fear that the Fed’s absence will lead to lower bond prices and sharply higher interest rates as the market struggles...

What to Watch for a Breakthrough or a Breakdown

Last week stock market investors continued to cling to, if not actually climb, the wall of worry. Stocks were flat for the first week of the government shutdown, but that masks the intraday volatility seen last week as drops were quickly reversed each day. The market moves last week were in part prompted by reports and rumors emanating from Washington, D.C. on the state of the negotiations over funding the federal government and lifting the debt ceiling...

What Demographics Tell Us About Health Care

Demographics, and particularly the aging population, are a very important factor in determining health care costs in the decades ahead. However, this is not the only factor, ore important is how (and when) the federal and state governments — and more critically — households and businesses respond to these rising costs...

Current Conditions Index 10/2/13

Over the past week, the LPL Financial Current Conditions Index (CCI) was relatively unchanged at 234. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has been improving modestly. A rise to around 250 would be consistent with stronger-than-average growth...

Many Happy Returns

The phrase “many happy returns” is often used for a birthday greeting and meant to augur a long, successful life. More broadly, the term can be used as a greeting to offer hope that a festive event would repeat many more times in the future. The current bond market environment can hardly be described as festive, but the month of September has bond investors exclaiming “many happy returns” following one of the better monthly performances of the past two years...

The Comeback

The similarities between 1967 and 2013 suggest that if the pattern in the stock market continues to hold, as we believe it may, and lawmakers eventually “kick the can” on the fiscal issues, the concerns that have led to the current pullback may give way to a resolution that powers a comeback later this year, as we saw in 1967...

Health Care Checkup: What We Spend on Health Care

Economy-wide (federal, state, and local governments, corporations, and individuals), Americans spent $2.7 trillion (or roughly 18% of GDP) on health care products, services, and investment in 2011, the latest data available. Consumers spend more out of pocket on health care than they do on automobiles, furniture, or clothing...

Portfolio Compass 9/25/13

Compass Changes: Downgraded precious metal commodities to neutral from neutral/positive. Upgraded energy commodities to neutral from negative/neutral. Downgraded agricultural commodities to neutral from neutral/positive. Upgraded intermediate municipal bonds to neutral/positive from neutral. Upgraded Treasury Inflation-Protected Securities (TIPS) to neutral from negative/neutral...

Current Conditions Index 9/25/13

Over the past week, the LPL Financial Current Conditions Index (CCI) eased to 232. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI is higher than a few weeks ago. A further rise to around 250 would be consistent with accelerating growth.​

The Great No Taper Caper

The Federal Reserve (Fed) surprised investors when it announced no reduction, or tapering, of bond purchases at the conclusion of last week’s Fed meeting. Never in the history of monetary policy have so many been misled by so few. The case to taper was debatable back in late spring and early summer when Fed Chairman Ben Bernanke and his compatriots first began to mention tapering. Inflation was running at a lower rate than when the Fed initiated purchases one year ago and economic growth...

The “Kick-the-Can” Pattern Keeps Giving to Investors in September

After kicking the can on Syria, a new Fed chairman, and now tapering, the market is beginning to wonder if the government funding deadline and debt ceiling are the next cans to be kicked by those in Washington. This week, the headlines will focus on the possibility of a government shutdown and the debt ceiling impasse, perhaps setting up another buy-the-dip opportunity ahead of an 11th hour compromise.​

Communication Breakdown?

In our view, Bernanke made a clear case to markets last week that tapering remains data dependent, and he even provided markets with specific metrics the FOMC was watching to gauge progress. Market participants may need to recalibrate how they listen to the Fed, and the Fed may need to rethink how it communicates with the markets and the public. The Fed will need the markets’ trust as it begins to prepare for the unwinding of all the monetary stimulus it has put into the system since 2007.

Current Conditions Index 9/18/13

Over the past week, the LPL Financial Current Conditions Index (CCI) moved up to 237. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has lifted this week after stabilizing in recent weeks. A further rise to around 250 would be consistent with accelerating growth...

History Repeating

Treasury yields declined heading into this week’s Federal Reserve (Fed) meeting, where the Fed is expected to announce a reduction, or tapering, of bond purchases. Even with looming uncertainty from the Fed meeting outcome, bonds witnessed robust investor demand last week with all three Treasury auctions...​

Consider Prepaid Tuition Plans for College Savings

If you’re currently investing for your children’s college education or are planning to do so in the near future, you may want to consider a state-sponsored prepaid tuition plan. Generally speaking, these plans, which are now available in many states, allow you to pay tomorrow’s tuition bills at today’s tuition rates. In addition...

Dawning of a New Era?

As this publication was being prepared on Monday, September 16, 2013, equity markets around the globe were rallying and bond yields were dropping on the news over the weekend of September 14 – 15, 2013 that Larry Summers — who market participants had pegged as the front-runner to replace Ben Bernanke as Federal Reserve (Fed) Chairman — withdrew his name from consideration...

Emerging Markets and the Fed - What’s Attractive and What to Avoid

While the Federal Reserve (Fed) could surprise investors this week, the Fed has been careful to communicate its intentions to the markets ahead of this week’s meeting. Most market participants expect the Fed to announce a tapering in the monthly pace of its bond-buying program coupled with more guidance on when, in the distant future, it may raise rates...

Portfolio Compass 9/11/13

Compass Changes: Downgraded consumer staples view to neutral/negative from neutral. Investment Takeaways: We expect the S&P 500 Index to grind higher in the second half of the year with increased volatility.* Fed uncertainty and stronger global growth backdrop remain negative overhangs for bonds. Nonetheless, the bond market has gone a long way to price in stronger growth and greater Fed interest rate risk...

Current Conditions Index 9/11/13

Over the past week, the LPL Financial Current Conditions Index (CCI) remained relatively unchanged at 227. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has stabilized with little overall movement in recent weeks. A return to around 250 would be consistent with stronger growth.

Reaching Barriers

Government bond benchmarks globally have reached key psychological barriers that may help stabilize high-quality bond markets or usher in additional weakness. A full slate of new issuance may shed light on investor appetite for still-higher yields and may help determine the near-term course of the bond market...

The One Big Risk

When Lehman Brothers filed for bankruptcy on September 15, 2008, defining the seminal event of the financial crisis, there was one big risk investors were worried about across their portfolios: credit risk — the potential losses arising from the inability of mortgage borrowers, financial institutions, and government enterprises to pay back their debts. As we reach the five-year anniversary of that event this coming weekend, another single big risk has emerged...

Trust

The latest Beige Book and the August employment report likely keep the Federal Reserve (Fed) on track to announce a scaling back of its bond-purchase program (quantitative easing, or QE) at the next Federal Open Market Committee (FOMC) meeting on September 17 – 18, 2013...

Current Conditions Index 9/4/13

Over the past week, the LPL Financial Current Conditions Index (CCI) remained relatively unchanged with a slight dip to 226. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has stabilized in recent weeks. A return to around 250 would be consistent with stronger growth...

Summer Fling

The Labor Day weekend marks the unofficial end of summer and for bond investors it ended with sunny skies with the best week of performance since mid-July. The broad Barclays Aggregate Bond Index returned 0.4% last week, the best weekly gain since a 0.7% return the week ending July 19, 2013, to finish a difficult month of August on a positive note. Is this the start of a more meaningful long-term relationship for bond investors after a tumultuous summer or just a summer fling that will prove...

Trading Partners

Our exports to our two closest neighbors, Canada and Mexico (27%), are larger than our exports to the Eurozone, Japan, and China combined (25%). Perhaps market participants (ourselves included) should pay more attention to the economic prospects for Canada and Mexico and a bit less time on China, the Eurozone, and Japan...

Stocks Likely to Focus on Domestic Over

The markets were most focused on an impending military strike on Syria last week. While prospects for an imminent strike have faded, the likelihood of military action in the near future remains. Unfortunately, the past offers us many periods of military action. Looking back at these can help us draw parallels and gain perspective on the most likely outcome for the markets...

Portfolio Compass 8/28/13

Compass Changes: Upgraded consumer staples view to neutral from neutral/negative. Upgraded precious metals and agriculture commodities to neutral/positive from neutral. Investment Takeaways: We expect the S&P 500 Index to grind higher in the second half of the year with increased volatility.* After another bout of weakness, a flattening yield curve, and aggressive Federal Reserve (Fed) rate hike expectations suggest the bond market may have priced...

Current Conditions Index 8/28/13

Over the past week, the LPL Financial Current Conditions Index (CCI) remained relatively unchanged with a slight dip to 228. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has stabilized in recent weeks. A return to around 250 would be consistent with stronger growth...

The Bond Sell-Off in Perspective

Longer-term Treasury yields finished last week roughly unchanged, but that is little consolation to investors during a difficult month of August. Investor patience was tested once again with a volatile week that saw the benchmark 10-year Treasury yield rise as high as 2.89% before creeping lower late in the week. For the month of August, however...

Deficit Distraction

In the 12 months ending July 2013, the federal government spent $3.4 trillion and took in $2.7 trillion in revenues, making the federal deficit about $725 billion, the smallest deficit recorded since late 2008. At just 3.5%, the deficit as a percent of nominal gross domestic product (GDP) over the past 12 months was also the smallest since late 2008, and stands in sharp contrast...

Two Bears and a Bull

The month of August has not been friendly to investors in any of the major asset classes. Stocks have dipped and bond yields have climbed, pushing bond prices lower. And, with the rise in inflation to 2.0% (as measured by the Consumer Price Index), there is greater purchasing power loss associated with holding cash or money market investments. The stock market is likely in the midst of another temporary pullback in a continuing...

Current Conditions Index 8/21/13

Over the past week, the LPL Financial Current Conditions Index (CCI) remained relatively unchanged with a slight dip to 226. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has stabilized in recent weeks. A return to around 250 would be consistent with stronger growth...

The Yield Ascent Resumes

Rising economic growth expectations, not Fed "tapering” fears, fueled the most recent leg down in the bond market. The bond market sell-off entered a new phase last week as Treasury yields broke clear to new highs. Unlike the initial leg of bond market weakness, which was driven equally by better economic growth expectations, Federal Reserve (Fed) rate hike fears, and concerns over a reduction in Fed bond purchases...

Exporting Good Old American Know-How

The United States has run a trade deficit (importing more goods and services from other countries than it exports) since the mid-1970s. Although the trade deficit narrows during recessions — imports typically fall faster than exports during a recession — the trade gap has increased over time, and currently stands at around 3.5% of gross domestic product (GDP). This large and persistent trade deficit acts as a drag on overall GDP growth...

Markets Entering Area 51

Area 51 has been steeped in mystery and a favorite subject of conspiracy theorists for decades. But CIA documents released late last week officially acknowledge its existence and suggest that its actual function was far less extraordinary or essential than believed by some. Like Area 51, the latest round of quantitative easing has been surrounded by mystery (What is it actually doing? Is it working? When will it end?)...

Current Conditions Index 8/14/13

Over the past week, the LPL Financial Current Conditions Index (CCI) remained relatively unchanged with a slight rise to 228. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has stabilized in recent weeks. A return to around 250 would be consistent with stronger growth...

Foreign Buying Intrigue

Like an international mystery caper, the habits of foreign bond buyers are not always readily apparent. Data on foreign buying are available from a few sources but with a lag, leaving investors to piece together the details over time. Any “real-time” information is only anecdotal via trading desks and therefore very difficult to quantify. Over recent weeks it has become clear that foreign investors’ apathy toward U.S. bonds played a role in the recent bond market sell-off...

Measuring Economic Expansion

The U.S. economy is now in the fifth year of the 12th economic recovery (or expansion) since the end of World War II. It is already the sixth-longest expansion and would have to last another year to become the fifth longest, as discussed last week. This week, we will compare the performance of gross domestic product (GDP) and its components...

Change in China and What it Means for Investors

Last week’s economic reports from China for July added fuel to the fiery debate over whether China’s economy is slowing rapidly, possibly forming a sharp “hard landing,” or slowing more gradually and likely forming a more shallow dip or “soft landing,” which could already be stabilizing. This debate focuses primarily on the pace of the decline and all sides assume an eventual rebound. However, the debate misses the point: whatever the landing, there may not be a rebound...

Optimum Fixed Income Fund

Many bond investors are still licking their wounds after the bond market suffered one of its worst quarters in the past 20 years during the second quarter of 2013. We believe it is important to review the contributing factors to performance in Q2, particularly as it relates to the Optimum Fixed Income Fund. While the fund’s performance was certainly disappointing the challenging quarter, and with the possibility of interest...

Portfolio Compass 8/7/13

Compass Changes: No changes. Investment Takeaways: ƒƒWe expect the S&P 500 Index to grind higher in the second half of the year with increased volatility.* Bond markets have stabilized to start the third quarter on dovish comments from Federal Reserve (Fed) Chairman Ben Bernanke, mixed economic data, and bond markets largely pricing in an earlier start to a possible reduction in Fed bond purchases...​

Current Conditions Index 8/7/13

Over the past week, the LPL Financial Current Conditions Index (CCI) remained relatively unchanged with a slight rise to 226. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has stabilized in recent weeks.

It’s a Grind

After one of the worst quarterly sell-offs in years, the bond market has witnessed only mixed relief so far this summer. The high-quality bond market, as measured by the broad Barclays Capital U.S. Aggregate Bond Index, was roughly unchanged in July 2013, posting a modest 0.1% total return for the month. On the positive side...

Summer of Love

If the pattern in the stock market mirroring 1967 that has unfolded so far this year holds in the second half, we may see a volatile market with a slower pace of gains — but more record highs ahead. It has been a summer of love for the stock market. As the temperatures heated up, so did the stock market. From June 24 to August 2, 2013, the S&P 500 Index rose 9%, pushing stocks up about 20% for the year...

Revisiting the Recovery

Last week’s data deluge did not change our view (or the markets’) about the economy or the Fed. We still expect modest 2.0% real GDP growth in 2013. We believe the labor market is still growing quickly enough to allow the Fed to begin to taper its bond-buying program known as quantitative easing sometime this fall. The recent high-profile reports on the economy did little...

Understanding and Managing Risk in a Bond Portfolio

As interest rates spiked in the second quarter of this year, many bond investors shifted gears from intermediate and long-term bonds to bonds with shorter maturities. The relationship between interest rates and bond prices is just one of many potential risks associated with bond investing. So why consider bonds?

Current Conditions Index 7/31/13

Over the past week, the LPL Financial Current Conditions Index (CCI) remained relatively unchanged at 225. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has stabilized in recent weeks...

Yield Ascent

The second quarter of 2013 witnessed a sharp increase in bond yields that led to broad-based price declines across the bond market. All sectors were impacted with only shorter-term securities faring better during a very difficult period for bond investors. From May 1, 2013 to July 5, 2013, bond yields witnessed one of the fastest increases...

Municipals Versus Corporates

Comparing municipal bond yields to Treasury yields is a common way to assess municipal bond valuations, but comparisons to the corporate bond market can be another useful metric to gauge value. We often cite municipal-to-Treasury yield ratios as a key barometer of the attractiveness of municipal bonds. Like most investments, there is more than one way to gauge value...

Under the Surface

Conditions have stopped worsening, and Europe’s economy may be stabilizing after a period of rapid economic deterioration. However, the deep-rooted negatives that lie not far under the surface may disappoint those expecting steady improvement. As we have all year, we continue to believe U.S. stocks will outperform their international peers...

Current Conditions Index 7/24/13

Over the past week, the LPL Financial Current Conditions Index (CCI) rose slightly to 226. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has stabilized in recent weeks...

Portfolio Compass 7/24/13

Compass Changes: Upgraded long-term municipal bonds to positive from neutral/positive. Shifted duration view to intermediate from short/intermediate. Investment Takeaways: ƒƒWe expect the S&P 500 Index to grind higher in the second half of the year with increased volatility.* Bond markets have stabilized in July on...

Debacle in Detroit

Detroit made history last week by filing the largest Chapter 9 bankruptcy on record. For most in the municipal bond market, the news was not surprising. Detroit’s demise was years in the making and several factors played a role in the city ultimately filing bankruptcy including, but not limited to: a declining revenue base in response to...

Unseasonable Weather Still Weighing on the Economy

The latest edition of the Fed’s Beige Book, released on July 17, 2013, continues to underscore the impact of the unseasonably cool weather on the U.S. economy. Housing and commercial real estate were mentioned as key drivers of growth and, for the first time this year, mortgage rates were mentioned. The number of negative words in the Beige Book has dropped to a seven-year low, reflecting...

Walking Dead Stock Market

Last week revealed the nominations for the 2013 Primetime Emmy Awards. Overall, 10 different dramas scored nominations for the shows or lead actors. But missing from the list was the show that is the number one drama in the coveted 18-to-49-year-old demographic: The Walking Dead. There was no respect for the unstoppable zombie drama from the television academy. Likewise, this unkillable stock market rally seems to get no respect. U.S. stocks have been snubbed by investors this year...

Current Conditions Index 7/17/13

Over the past week, the LPL Financial Current Conditions Index (CCI) fell to 219. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has slid, on average, in recent weeks...

Light at the End of Tunnel

Signs of stabilization have begun to emerge in the municipal bond market after a difficult two months. Fears of an earlier end to Federal Reserve (Fed) bond purchases drove widespread bond market weakness from the beginning of May through the first week of July. Less liquid and less frequently traded fixed income markets, such as municipal bonds, bore the brunt of weakness with...

What We Are Watching for This Earnings Season

Four times a year, investors focus on the most fundamental driver of investment performance: earnings. Unfortunately, like the economy, earnings growth remains sluggish. The second quarter of 2013 is likely to mark another quarter of low to mid-single-digit earnings per share growth. We will be watching for key trends that may impact future quarters: fiscal drag, slower global growth, wider profit margins, rising buybacks, and higher interest rates...

Crash Course on Student Loans

In recent months, student loans have been all over the news. Some recent headlines include: ƒƒ“Student loan crisis”; ƒƒ“Student loan rates to double”; ƒƒ“Student loan delinquency skyrocketing”. In our view, the outlook for the student loan situation is much more balanced than recent headlines suggest. Student debt is soaring, but the devil is in the details behind the headlines. The federal government guarantees...

Portfolio Compass 7/10/13

Compass Changes: Upgraded health care and consumer discretionary to neutral/positive from neutral. Upgraded financials and small and large value to neutral from negative/neutral. Downgraded energy and materials to negative/neutral from neutral. Investment Takeaways: ƒƒWe expect the S&P 500 to grind higher in the second half of the year with increased volatility.* Lingering fears over the Federal Reserve (Fed) reducing...

Current Conditions Index 7/10/13

Over the past week, the LPL Financial Current Conditions Index (CCI) rebounded modestly to 228. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has slid in recent weeks...

Using Life Insurance to Ensure Business Continuity

The loss of critical personnel can be life threatening to small businesses; however, it's a risk that life insurance can often mitigate. In fact, life insurance policies are frequently used in plans aimed at making it possible for a business to survive a change of ownership or the loss of a partner, the chief executive or an employee whose creative talent, technical knowledge or salesmanship drives the business...

Fixed Income Mid-Year Outlook

The bond market suffered through its worst quarterly performance since 2004 in response to the Federal Reserve (Fed) signaling it will reduce, or taper, the pace of bond purchases earlier in 2013 than anticipated. The economy also proved resilient to higher tax rates and government spending cuts. Both factors contributed to bond market weakness, but the “tapering tantrum” was the dominant driver...​

The Right Recipe for Stocks

The summer means cookouts. The recipe for success is usually simple: take a basic ingredient, add some characteristic flavors, and apply some heat. The recipe for stock market investing success may be as simple as taking the S&P 500 and adding the characteristics provided by buybacks as the market heats up in the second half of the year. Some characteristics to consider for a good core U.S. stock portfolio for the second half include...

Real and Sustainable: An Update

The June 2013 employment report revealed that the private sector economy continues to add about 200,000 jobs per month, keeping the Fed on a pace to taper quantitative easing this fall. The labor market is at best a coincident indicator of economic activity, so the uptick in jobs is not likely to signal an uptick in the pace of economic growth.

Current Conditions Index 7/3/13

Over the past week, the LPL Financial Current Conditions Index (CCI) was unchanged at 216. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has slid in recent weeks...

Eliminating Exposure to Natural Resource Equities

We are eliminating exposure to natural resource equities and shifting the allocation domestically, to large cap core equities. The initial thesis for natural resource equities was based on global growth, and more specifically the growth of emerging market (EM) economies. We still believe that EM is capable of delivering superior growth relative to the developed world, but we want to reduce exposure, as we believe those growth rates could slightly slow over time...

Mid-Year Outlook

The investment landscape for the first half of 2013 has proven to be a toughone to navigate. And this is likely to continue through the second half of this year. There is a lot of rocky terrain and potentially some surprises ahead that investors need to prepare for...

Revisiting the Residential Recovery

The recent rise in mortgage rates — from just under 3.5% (for a conventional 30-year loan) to just under 4.5% since mid-May 2013 has led to widespread fears the housing recovery would come grinding to a halt. Those fears appear to be overdone, in our view, as almost all of the factors supporting an ongoing recovery in housing remain in place. At this stage of the recovery, satisfying pent up demand for housing rather than mortgage rates is likely to be the bigger driver of housing...

How to Work With a Financial Advisor

The continuously shifting investment climate, the sheer number of investment products to choose from and the emergence of employee-driven retirement savings plans, such as 401(k) plans, have all contributed to the increased need for qualified financial advice. No matter what your level of investment experience or sophistication, you may benefit from developing a relationship with a financial advisor...​

Home Refinancing Basics

In recent years, Americans seeking to capitalize on low interest rates have lined up to refinance their mortgages--often resulting in significantly lower monthly payments. While it’s true that refinancing has the potential to help reduce the costs associated with borrowing money to own a home, it is not necessarily a strategy that makes sense for every individual...

Searching for Inspiration

The U.S. stock market’s stalling momentum and increasing volatility, combined with other signs evident in the market’s recent behavior, suggest investors may be looking for new inspiration. A flu pandemic or an act of war by North Korea could be a shock that results in a setback to the economy and stock market, while the aggressive stimulus in Japan could be a boost that finally gets stocks to break out of their month-long range...

Small-Business Financing: Debt vs. Equity

Business owners who seek financing face a fundamental choice: Should they borrow funds or take in new investment capital? Since debt and equity are accounted for differently, each has a different impact on earnings, cash flow and taxes...

Strategies for Tax-Efficient Investing

Just about every investor knows, it’s not necessarily what your investments earn, but what they earn after taxes that counts. After factoring in federal income and capital gains taxes, the alternative minimum tax, and any applicable state and local taxes, your investment returns in any given year may be reduced by 40% or more.

Saving for Short-Term Financial Goals

Most of us know we need to save for our future goals. Buying a home, providing an education for our children and investing for a secure retirement are the most common long-term savings goals. But what about next year’s vacation, remodeling or refurbishing your house, or buying a second car?

Naming Beneficiaries of Insurance Policies and Retirement Plans

One estate planning concern that is shared by people from all walks of life is who gets what when you pass on. While some individuals logically may assume that a last will and testament is the only official forum to express such decisions, that is not always the case. Often, an equally important issue is determining who to name as beneficiary on life insurance policies, employer-sponsored retirement plan accounts and IRAs, since beneficiaries of these assets are paid directly as named...

Getting Your Children Involved in Saving for College

The planning required to send a child to college may seem overwhelming, but parents do not have to do all the work. Getting children involved in college planning may be an excellent way to teach responsibility to young people—a lesson that could reap benefits well beyond their college years.

Diversification: A Fundamental Strategy for Reducing Portfolio Risk

Diversification is one of the most basic investment concepts. It is used by novice investors and sophisticated portfolio managers alike to help reduce portfolio risk and dampen the negative effects of market volatility. The premise behind diversification is easy to grasp: When you own a range of investments, you may reduce risk by creating the potential for better performers to compensate for poor performers.

Good Debt, Bad Debt: Keys for Knowing the Difference

Today debt and instant credit are part of our everyday lives. The convenience of instant credit, however, has taken its toll. Many individuals use credit cards to spend more than they earn. Some, who never use credit, can be denied a loan or credit when they have a justifiable use for it. Using credit establishes a history of financial responsibility: Until you establish a credit history, your chances of qualifying for an important loan, such as a mortgage, are greatly reduced.

Making a Charitable Choice

The greatest benefit of charitable giving is the knowledge that you’ve made a positive contribution to others. At the same time, charitable giving can also provide tax breaks so long as you are aware of some rules and keep track of what you’ve donated.

Your Second Wind - Starting a New Business in Retirement

For generations past, retirement represented an extended period of leisure time punctuated by occasional games of golf and bridge. But today, with lengthening life expectancies and dwindling pensions, many Americans are looking to retirement as an opportunity to start a new business.

Using 529 Plans to Invest for College & Manage Wealth

Paying for a child’s or grandchild’s college education is an expensive proposition, even for many high-net-worth Americans. Today’s elite institutions promise graduates a rewarding future, but at a cost that more often than not extends well into six figures. Enter the 529 plan, a tax-advantaged investment vehicle generally available to families regardless of their income level. For affluent parents and grandparents, a 529 plan offers a variety of potential benefits

Women & Retirement: What You Need to Know

More than half of women (53%) surveyed recently are the primary breadwinners in their households, yet only 20% consider themselves “very well prepared” with their financial decision making.1 Nearly one-third of those surveyed said they earn more than their spouse as a direct result of the rocky economy. Among male breadwinners, 45% consider themselves

Pay Yourself First - and Regularly - With Dollar Cost Averaging

To remain financially responsible, everyone must pay bills on a regular basis. These bills include mortgages, utilities, car loans and credit cards. Unfortunately, many people do not also heed the oft-quoted advice to pay themselves first. The reality is that a steady saving and investing plan is sometimes necessary to help pursue such financial goals as paying for a wedding or new car, buying a house and funding retirement. One strategy that can help you develop a

Incentive Trusts-Keeping a Steady Hand on the Tiller

A good legacy may work wonders for those left behind, but you may feel that your heirs need more than just financial benefit from your estate. If you would like to provide direction to your heirs and help ensure that they pursue important life goals, you may consider including incentive trusts in your estate plans.

Rebalancing to Keep Your Portfolio on Track

Over time some asset classes or investments inevitably outperform or underperform others causing your portfolio allocation to shift. This is especially true during times of heightened volatility, like the markets are experiencing today. This shift, also known as “portfolio drift,” can significantly increase a portfolio’s risk and cause it to become misaligned with its target allocation.

 
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