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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.

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.

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.

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.​

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.

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.

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.

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.

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.

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...

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...

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...

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...

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...

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...

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...

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...​

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...

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...

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...

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...

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...

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...

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...

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...

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...

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...

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...​

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...

Portfolio Compass 6/26/13

Compass Changes: Downgraded long-term munis and high-yield munis to neutral/positive from positive. ƒƒMoved duration to short/intermediate from intermediate. Investment Takeaways: While our near-term stock market view remains slightly cautious, our bias has become more positive following the recent pullback. Fears of the Federal Reserve (Fed) reducing the pace of bond purchases continues to pressure yields higher...

Current Conditions Index 6/26/13

Over the past week, the LPL Financial Current Conditions Index (CCI) fell to 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...

When Will the Selling Stop?

The past week brought about the summer solstice, the official start of summer, but for bond investors it feels more like the dead of winter. Bond weakness continued in response to a Federal Reserve (Fed) that remains fixated on slowing, or tapering, bond purchases following last week’s policy meeting. A review of several bond metrics may help answer the question at theforefront of bond investors’ minds: “when will the selling stop?”...

Current Conditions Index 6/19/13

Over the past week, the LPL Financial Current Conditions Index (CCI) was 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 in recent weeks and did not experience much of the dip seen in the spring of recent years...

Time to Get Short?

Following the recent bond market pullback, many investors are questioning whether a more defensive stance, via short-term bonds is more appropriate to help protect against additional price declines should interest rates continue to move higher. The bond market stabilized last week with...

Net Lease Real Estate Could Face Challenges in a Rising Rate Environment

During the economic crisis, as well as over the past few years, net lease real estate investment trusts (REITs) have been one of the best-performing real estate asset classes according to Net Lease Composite Price Index. Recent strong performance has been driven, to a large extent, by a drop in interest rates. Net lease REITs tend to represent...

Portfolio Compass 6/12/13

Compass Changes: Downgraded emerging market equities to negative/neutral from neutral. Downgraded consumer staples equities to negative/neutral from neutral. Downgraded emerging market debt to neutral from neutral/positive. Investment Takeaways: Our near-term stock market view is slightly cautious, with stocks having outpaced our 2013 forecast* and given the magnitude and duration of the rally...

Current Conditions Index 6/12/13

Over the past week, the LPL Financial Current Conditions Index (CCI) fell 10 points to 229. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. The CCI has stabilized in recent weeks and did not experience much of the dip seen in the spring of recent years...

The Yield Rally Continues

Strong demand during this week’s Treasury auctions would be a sign that now-higher yields are enough to compensate investors, despite the uncertainty of when the Fed may begin to reduce the pace of bond purchases. Signs are emerging that the rise in yields has begun to attract demand. We view the current bond sell-off as being overdone, as the Fed’s timing around a possible first interest rate increase has not materially changed...

Current Conditions Index 6/5/13

Over the past week, the LPL Financial Current Conditions Index (CCI) was basically unchanged at 239. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. Over the past few weeks, momentum in the CCI has stabilized...

Miserable May

All eyes are on this week’s release of the monthly employment report (on Friday, June 7, 2013), as high-quality bonds concluded one of their worst monthly performances of the past 10 years. The broad Barclays Aggregate Bond Index declined 1.8% in May 2013, the worst monthly performance since December 2009, which in turn is the weakest since October 2008...

Portfolio Compass 5/29/13

Compass Changes: Downgraded large foreign equities to negative/neutral from neutral. Investment Takeaways: Our near-term stock market view is slightly cautious, with stocks having outpaced our 2013 forecast* and given the magnitude and duration of the rally. ƒƒWe have lowered our large foreign view due to our belief that the market’s expectations for Europe’s recovery are overly optimistic and because the European debt crisis is not yet over...

Current Conditions Index 5/29/13

Over the past week, the LPL Financial Current Conditions Index (CCI) was basically unchanged at 243. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. Over the past few weeks, momentum in the CCI has stabilized.

Tapering Tantrum Take Two

The bond market suffered through another week of tapering tantrums with yields closing higher for a fourth consecutive week and near the highs of 2013. Federal Reserve (Fed) Chairman Ben Bernanke did little to clear the uncertainty over the timing of reducing, or tapering, bond purchases in Congressional testimony last week...

Current Conditions Index 5/22/13

Over the past week, the LPL Financial Current Conditions Index (CCI) improved slightly to 245. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. Over the past few weeks, momentum in the CCI has generally improved after deteriorating in the prior weeks.

Tapering Tantrums

The fear of an earlier reduction in the pace of bond purchases has been a factor in recent weakness in Treasury prices. Inflation data argue for continued bond purchases, and focus falls on Fed Chairman Ben Bernanke this week, as he may address this uncertainty. We continue to view yields as range-bound. Any tapering-related bond sell-off is likely to be limited unless corroborated by better economic data.

Current Conditions Index 5/15/13

Over the past week, the LPL Financial Current Conditions Index (CCI) slid slightly to 239. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. Over the past few weeks, momentum in the CCI has generally improved after deteriorating in the prior weeks.​

Portfolio Compass 5/15/13

Compass Changes: Downgraded the energy commodity to negative/neutral from neutral. Investment Takeaways: Our near-term stock market view is slightly cautious, with stocks having outpaced our 2013 forecast* and given the magnitude and duration of the rally. Our views on cyclical versus defensive sectors have become more balanced due to our focus on yield and in anticipation of a stock market pullback...​

Yield Shock

Yields rose across the bond market in recent days, as investors may have finally said “enough is enough” to low yields. Yields on several higher-yielding segments of the bond market at multi-year lows or, in the case of high-yield bonds, new record lows, reversed higher over the past two days (Friday, May 10 and Monday, May 13, 2013) as investors reassess valuations...

Current Conditions Index 5/8/13

Over the past week, the LPL Financial Current Conditions Index (CCI) rose to 244. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. Over the past few weeks, momentum in the CCI has improved after deteriorating in the prior weeks.

Settling Differences

Stock and bond markets may continue to settle their differences this week, resulting in slightly higher yields. In recent weeks, stock and bond markets had taken divergent views of the macro investing landscape. While stocks, as measured by the S&P 500 Index, reached new record highs, the bond market took a more somber view...

Current Conditions Index 5/2/13

Over the past week, the LPL Financial Current Conditions Index (CCI) rose from 231 to 239. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. Over the past few months, momentum in the CCI has improved slightly but moderated in the past several weeks.

Portfolio Compass 5/1/13

Compass Changes: Downgraded investment-grade corporate bonds to neutral from neutral/positive Investment Takeaways: Our near-term stock market view is slightly cautious, given our Base Path expectation for modest single-digit returns in 2013.* Our views on cyclical versus defensive sectors have become more balanced due to our focus on key investment themes and in anticipation of a stock market pullback. Higher-yielding...

Back to the Future

Mark Twain once stated that history does not repeat itself, but it often rhymes. Join us as we take a look back to the past to see what the future may hold for bond investors, given the many uncertainties. Our broad takeaway is that a low-return environment could likely be the norm, and the 1950s may provide a rough guide of what to expect. The monetary policy backdrop and bond market of the early 1950s bears some resemblance to today’s environment...

Mixed Bag

The first quarter of 2013 presented a mixed bag for income-seeking investors but did little to ease the difficult task of income-generation in today’s low-yield environment. High-quality bond prices declined over the first quarter, but weakness was modest and yields increased only slightly, limiting opportunity for income-seeking investors. Lower-rated bonds...

Current Conditions Index 4/24/13

Over the past week, the LPL Financial Current Conditions Index (CCI) slid slightly to 231. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. Over the past few months, momentum in the CCI has improved slightly but moderated in the past several weeks.

Assessing Interest Rate Risk

It seems there is no shortage of investors willing to forecast the impending doom for the bond market stemming from a reversal of the long decline in interest rates. Last week, the commissioner of the SEC Daniel Gallagher stated that “financial armageddon” awaits municipal bond investors due to rising interest rates. Commissioner Gallagher tried to retract comments late in the week, saying...

First Quarter 2013 SAM/Research Recommended Mutual Fund Models

Stocks got off to a strong start in 2013. The fiscal cliff compromise that emerged shortly after New Year’s Day set a positive tone, while bold intervention from central banks worldwide provided support for U.S. stocks and drove investors to favor lower-rated, higher-yielding sectors within the bond market...

Portfolio Compass 4/17/13

Compass Changes: Upgraded health care to neutral from negative/neutral. Upgraded emerging market debt to neutral/positive from neutral. Upgraded oil commodity from neutral/negative to neutral. Downgraded precious metals commodities from neutral/positive to neutral. Downgraded technology from neutral/positive to neutral. Investment Takeaways: Our near-term stock market view is...

Municipal Muddle-Through

The municipal bond market continues to work its way through a difficult seasonal period of performance. A difficult month of March lived up to its traditional billing, before a rebound emerged in late March/early April. Internal demand from within the municipal bond market remains mixed at best, with spillover effects from recent Treasury market strength the primary driver of municipal bond stability...​

Current Conditions Index 4/10/13

Over the past week, the LPL Financial Current Conditions Index (CCI) slid slightly to 241. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. Over the past few months, momentum in the CCI has improved slightly but moderated in the past few weeks.In the latest week, the index was negatively affected by a deterioration in initial jobless claims, commodity prices and the VIX, while supported by improvement in BAA spreads.

Emerging Rebound

The first quarter of 2013 witnessed the worst quarterly performance for emerging market debt (EMD) investors since 2008 and the peak of the financial crisis, as measured by the JP Morgan Global Emerging Market Bond Index. A moderation in EMD performance was to be expected after strong performance in 2012, but recent weakness appears to have run too far...

Current Conditions Index 4/3/13

Over the past week, the LPL Financial Current Conditions Index (CCI) slid slightly to 244. The path of the CCI remains consistent with continued, though modest, economic growth in the United States. Over the past few months, momentum in the CCI has improved slightly but moderated in the past two weeks.​

Portfolio Compass 4/3/13

Compass Changes: No changes. Investment Takeaways: Our near-term stock market view remains slightly cautious, given our Base Path expectation for modest single-digit returns in 2013.* ƒƒWe continue to favor economically sensitive (cyclical) sectors over defensive sectors in general, but our views have become more balanced recently as the S&P 500 has rallied to record highs. Our neutral emerging markets view reflects higher near-term risks as China...

Recurring Themes

Lower-rated bonds led performance within the bond market during the first quarter of 2013, continuing a theme from 2012. For the second quarter of 2013, we expect the performance differential between lowerrated and high-quality bonds to moderate. Our low-single-digit total return forecast for 2013 remains intact.

 
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