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Results: 194 Articles found.

TIME TO BUY MORTGAGES?

Mortgage-backed securities (MBS) may provide opportunity in a challenging bond market environment.

CORPORATE BEIGE BOOK: SENTIMENT MIXED

Our analysis of earnings conference call transcripts for the first quarter earnings period provides a mixed picture.

BUILDING BLOCKS

Job growth may be slowing, but when put in a broader context, it may also be at the height of its new potential.

BONDS IN AN ELECTION YEAR

Much work has been done on potential election year impacts for the stock market, but little on interest rates and the bond market.

YET ANOTHER DISCONNECT

In our view, the April 2016 employment report underscores a key disconnect between the market and Federal Reserve (Fed).

WHAT MIGHT TRUMP THE ELECTION YEAR PATTERN?

This week we look at what the upcoming presidential election may mean for markets in 2016.

HIGH-YIELD: STILL ALL ABOUT OIL

Oil and high-yield bond prices remain tightly linked. A close relationship between the two has persisted since summer 2014, when...

CONSUMER CHECK-IN

The 75% run-up in oil prices from the multiyear lows hit in mid-February 2016 has raised concerns that the U.S consumer may run for the hills.

IS SELL IN MAY JUST A CLICHÉ?

“Sell in May and go away” is probably the most widely cited cliché in stock market history.

THE NEGATIVE RATES EXPERIMENT

Negative interest rates are likely to persist as two central banks reiterated their commitment and a third, the Bank of Japan (BOJ), could do the same this week.

FOMC FAQs: WHEN DOVES CRY?

As the third of eight Federal Open Market Committee (FOMC) meetings of 2016 approaches later this week, the market and the Federal Reserve (Fed) again remain deeply divided over the timing and pace of Fed rate hikes.

VALUE COMEBACK?

Value stocks have staged a comeback versus growth after a long losing streak.

MIXED MESSAGES FROM MUNICIPALS

Low yields coupled with fair valuations send a mixed message from the municipal bond market.

TAKING STOCK AFTER THE RALLY

Stocks have had quite a nice run. Since the February 11, 2016 lows the S&P 500 has gained 14%. The rally...​

FOLLOWING THE MONEY IN EM CURRENCY MARKETS

Emerging markets (EM) tantalize investors with the prospects of higher returns; yet the key to these returns may be the value of the U.S. dollar.

STATE OF THE STATES

With the deadline approaching, taxes are front and center in the minds of investors.

GAUGING GLOBAL GROWTH: AN UPDATE FOR 2016 & 2017

As U.S. corporations begin to report their results for the recently completed first quarter of 2016, global growth will likely take center stage among investors.

EMERGING MARKET EARNINGS: IS THE TIDE TURNING?

After disappointing investors last year, emerging market earnings forecasts may finally be consistent with what can be delivered.

A TALE OF TWO HALVES

The first quarter of 2016 is in the record books and for most, including bond investors, it was a tale of two halves.

CHECKING IN ON TRADE

The U.S. has run a trade deficit (importing more goods and services from other countries than it exports) since the mid-1970s, which acts as a drag on overall gross domestic product (GDP) growth.

Q1 2016 EARNINGS PREVIEW: NO MORE EXCUSES

First quarter earnings results will not be very exciting, but the earnings trajectory may be at a trough.​

RISING BOND DEALER HOLDINGS

The recent rise in bond dealer Treasury holdings has spawned concerns about the U.S. bond market, ranging from foreign selling to the potential fragility of the bond market.

MARCH 2016 EMPLOYMENT REPORT PREVIEW

The Bureau of Labor Statistics (BLS) of the U.S. Department of Labor will release its always widely anticipated Employment Situation report for March 2016 on Friday, April 1, 2016.

MARKET’S MARCH MADNESS

The NCAA Men’s College Basketball Final Four is set. In that spirit, we share our own Final Four for the stock market this year: China, earnings, the Federal Reserve (Fed), and oil.

TIPS TAILWIND

High-quality bonds broadly have enjoyed a good start to 2016, but Treasury Inflation-Protected Securities (TIPS) have particularly benefited recently and, last week, received an added tailwind from the Federal Reserve (Fed).

THE FED’S SPRING SURPRISE

As 2016 began and 2015 ended, global financial markets faced plenty of uncertainty in the wake of the first rate hike by the Federal Reserve (Fed) in nearly nine years.

EUROPE — NOT ENOUGH GROWTH

Forecasts for European corporate earnings have become increasingly pessimistic.

THE FED: FRIEND OR FOE?

The real question investors will grapple with at the conclusion of this week’s Federal Reserve (Fed) meeting is whether the Fed is pro-growth (a friend) or a potential threat (foe) to financial markets.​

FOMC FAQs: ALL ABOUT THE DOTS

As the second of eight Federal Open Market Committee (FOMC) meetings of 2016 approaches later this week, the market and the Federal Reserve (Fed) remain deeply divided over the timing and pace of Fed rate hikes.

WILL EIGHT BE GREAT FOR THE BULL?

The bull market turns seven. During that seven-year period, the S&P 500 nearly tripled, gaining 194% in price and producing a total return of 241%.

WILL GOLD CONTINUE TO SHINE?

We see enough factors supporting gold to justify a modest allocation in suitable portfolios.

BEIGE BOOK: WINDOW ON MAIN STREET

The latest Beige Book suggests that the U.S. economy is still growing near its longterm trend, but that the drag from a stronger dollar and weaker..

AN INTERNATIONAL PERSPECTIVE

International factors can help explain the relative resilience of longerterm bonds from mid-February to the start of March.

OIL, OIL, EVERYWHERE BUT NOT A DROP TO BUY?

Despite the modest size of the energy sector (typically less than 10% of total market capitalization), crude oil and the broader stock market, as measured by the S&P 500, have had very high correlation during the past few months.

TOO SOON FOR MARCH MADNESS?

While the next FOMC meeting isn’t until mid-March, markets are already trying to decipher how the gap between the Fed’s forecast of the fed funds rate and the market’s expectations will be resolved.

MUNICIPAL CHECK-IN

Municipal bonds have failed to keep pace with Treasury strength so far in 2016, but performance has been robust.

FROM HEADWIND TO TAILWIND?

Since the middle of 2014 — as markets prepared for the start of Federal Reserve (Fed) interest rate hikes and more easing from the European Central Bank (ECB) and the Bank of Japan (BOJ) — the U.S. dollar has been on a near historic run higher versus the currencies of major U.S. trading partners.

CORPORATE BEIGE BOOK: MODEST DETERIORATION IN SENTIMENT

Our Corporate Beige Book highlights modest deterioration in corporate sentiment.

POLITICS, ECONOMICS, AND THE BREXIT TWO SIDES OF THE SAME COIN

Heads or tails, politics or economics? Politics and economics are separate, but related disciplines, like two sides of the same coin.

HOW EXTREME IT IS

The 10-year Treasury yield has fallen by 0.6% over the past six weeks, a very rare occurrence.

DATA-DRIVEN PERSPECTIVE ON A ROUGH START TO 2016

It has been a rough start to 2016 for the stock market. In fact, it’s been one of the worst starts to a year in the history of the S&P 500.

WHAT DO CLAIMS CLAIM?

We have raised the odds of recession to 30% today, from around 10 – 15% at the start of the year.

WHAT A NON-RECESSIONARY BEAR MIGHT LOOK LIKE

Bear markets can occur without recessions. There have been ten bear markets in the S&P 500 since 1968, and four of them occurred without an accompanying recession.

GROUNDHOG DAY?

Our view is that while the odds of a U.S. recession in 2016 remain low, they have increased since the start of the year. Some investors fear that the remainder of the year will be a repeat of January 2016, 2008, or 1998, which we think is unlikely.

FEAR FEBRUARY AFTER JITTERY JANUARY?

Don’t worry about the January Barometer, which says, “As goes January, so goes the year.”

FOMC FAQs: MAKING A STATEMENT

Federal Reserve (Fed) policymakers face a difficult task this week. Although it is not expected that they will raise rates again as soon as this week’s meeting, they have to communicate the Fed’s policy intentions...

FIVE FORECASTERS: FEW WARNING SIGNS

The Five Forecasters still favor the continuation of the current bull market and no recession.

THE CHALLENGES FACING EMERGING MARKETS DEBT

Emerging markets debt (EMD) valuations have cheapened in recent weeks, as weaker Chinese economic data and lower oil prices pushed prices lower and yield spreads higher.

BEIGE BOOK: WINDOW ON MAIN STREET

The latest Beige Book suggests that the U.S. economy is still growing near its long-term trend. However, Main Street’s latest assessment suggests that the manufacturing sector continues to be affected by oil and energy prices.

ANY BULLS LEFT?

The number of bulls is dwindling. In periods of extreme market volatility such as we have experienced in recent weeks

FED RATE HIKE PLAYBOOK: PART 2

In Part 2 of our Federal Reserve (Fed) rate hike playbook, we assess how municipal bonds have fared during periods of Fed rate increases.

CAN EARNINGS HELP?

The start of fourth quarter earnings season may help the stock market find its footing.

CHINA: A ROCKY START TO A NEW (OLD) YEAR

Once again, the precipitous decline in the value of the Chinese stock market has spilled over to the broader global financial markets.

FED RATE HIKE PLAYBOOK: PART 1

The Federal Reserve’s (Fed) first rate hike in nine years is officially history, and a look back at prior interest rate hike periods may help bond investors decide how to position portfolios for 2016 and beyond.

CAPEX CONUNDRUM

A number of key U.S. and global economic reports are due out this week (January 4 – 8, 2016), as investors return from the holiday break and refocus on many of the same issues that bedeviled the market in 2015, including the price of oil and the signal it is sending about the health of the global economy.​

TURNING THE PAGE

It was a lackluster 2015 for the stock market with the S&P 500 managing a total return of just 1.4% (dividends included).

FINALLY

Finally! For the first time in nine years, the Fed finally raised interest rates.

THE WAIT IS OVER

The Federal Open Market Committee (FOMC), the monetary policymaking arm of the Federal Reserve (Fed), finally raised the target for the federal funds rate by 0.25% on Wednesday, December 16, 2015.

FOMC FAQS

As we noted in our Outlook 2016: Embrace the Routine publication, the start of a new Federal Reserve (Fed) rate hike cycle may grab investors’ attention, but investors must distinguish where it is more likely to disrupt their accustomed routine (bonds) and where it is more likely to be just a distraction (stocks).​

2016 FIXED INCOME OUTLOOK: NEW EPISODE, SAME SHOW

We expect a limited return environment may persist in 2016 and the year as a whole may look similar to 2015.

BACK TO A ROUTINE: 2016 ECONOMIC OUTLOOK

Our view is that the U.S. economy — as measured by real gross domestic product (GDP) — is likely to post growth of 2.5 – 3.0% in 2016.

NO PAIN, NO GAIN: 2016 MAY REQUIRE TOLERANCE FOR VOLATILITY

Gains in 2016 may require tolerance for volatility. Stocks historically have offered a tradeoff of higher return for higher risk...

FED IMPLICATIONS

stocks to navigate the eventual start of the Fed rate hike cycle with the benefit of a continued U.S. economic expansion and earnings gains in the months ahead. Although Fed stimulus and low interest rates have played a role in fueling the current bull market, earnings growth has been a far bigger factor.​

YES, AND NO

In the wake of last week’s FOMC decision not to raise rates, markets focused more on the FOMC statement and press conference than the dovish tone the decision may have suggested. In addition to inflation data, the Fed may be looking back at historical effects of Fed tightening during international turmoil. We continue to expect the Fed to hike in coming months, likely in December 2015.

FED: KICK OFF OR PUNT?

The outcome of this week’s Fed meeting is unlikely to materially alter the total return environment for fixed income investors. High-quality bonds can still provide gains and diversification benefits during periods of rising rates. A challenging low-return environment still confronts investors.

SHOULD EMERGING MARKET INVESTORS FIGHT THE FED?

Fighting the Fed may be a winnable battle for EM. EM valuations are compelling and, in our view, have priced in a fair amount of risk. We see sufficient upside potential to maintain modest EM equity allocations despite significant growth challenges.

HOW MUCH, HOW FAR, HOW FAST, NOT WHEN?

Although there is a chance the Fed will raise rates this week, our view remains that the Fed will hike later this year, most likely at the December 2015 meeting. While much of the focus has been on “when,” market participants may start asking “how much” and “how fast” rates may increase once the Fed begins to raise the rates. The current disconnect on the “how much” and “how fast” between the FOMC and the financial markets could be a major issue for financial market participants in the months ah​

BONDS TO FED: DO NOT RAISE RATES

Inflation expectations, the yield curve, and stock market volatility have raised the bar for a September rate hike. The Fed has a tall task ahead to justify a September rate hike, but it nonetheless remains a possibility. We believe the Fed will wait until December 2015 or possibly even early 2016, as there appears little downside risk to holding off.

CONSULTING OUR TECHNICAL PLAYBOOK

In challenging market environments, technical analysis tools can help us make better investment decisions. Our technical playbook suggests recent market weakness may present a buying opportunity. We are mindful of risks that might impact our playbook, including a potential China hard landing or a central bank policy mistake.

BEIGE BOOK UPDATE 9/8/15

The latest Beige Book suggests that the U.S. economy is still growing at or above its long-term trend, and that emerging upward wage pressures may get the Fed’s attention soon. Optimism regarding the economic outlook far outweighed pessimism throughout the Beige Book once again. Concerns over China’s impact on the U.S. economy have increased on Main Street.

12 QUESTIONS FOR A 12% CORRECTION

This week we answer the top 12 investor questions in response to the S&P 500’s 12% correction. We expect the U.S. economic expansion and bull market may continue through year-end, despite the latest stock market correction and China uncertainty. We reiterate our forecast for stocks to produce midto high-single-digit returns in 2015.

CHINA CHALLENGE

Markets remain concerned with China’s stock market and its potential impact on global economic growth. Although the U.S. only sends 7% of its exports to China, several of the world’s top economies have large export relationships with China. Despite China’s ongoing slowdown since 2010, media attention has risen sharply in recent weeks.

MID-CYCLE CREDIT CHECK

High-yield bond valuations have cheapened in sympathy with equity market volatility but have shown relative resilience. Some signs of credit quality deterioration have emerged but remain at the fringes of the market and are not representative of corporate bonds overall. Corporate bond prices may have moved more than justified by fundamental data.

FORECAST FOR CLEAR SKIES

The latest reading on the Conference Board’s monthly LEI helps to provide some timely guidance regarding recent market volatility. The LEI says the risk of recession in the next 12 months is very low (4%), but not zero. Based on the level of the LEI relative to its prior peak, the current economic expansion may last at least another four years.

THE MARKET DOWNTURN IS HERE, NOW WHAT?

As a bull market matures over the second half of an economic expansion, periods of increased market volatility are likely to become more common. Periods of volatility bouts will likely create a more challenging environment for investors, and in the short term, sentiment can control markets as investor sensitivity to certain risks spikes. We believe the macroeconomic fundamentals and the dynamism of American corporations are likely to drive further stock market gains.

HIGH-YIELD OIL SLICK

The year-to-date performance advantage of high-yield bonds relative to Treasuries (based on the Barclays High Yield and Treasury indexes) has been reduced to a very narrow margin following rising oil-related default fears. We find current market-default expectations, which imply a 15% default rate over one year, overly pessimistic. Few bond maturities come due through the end of 2016, a key factor that will likely support a low-default environment for high-yield bonds overall.

GLOBAL GDP TRACKER: SUMMER 2015 EDITION

Q2 GDP results to date suggest global growth in 2015 is accelerating versus 2014, despite some high-profile GDP misses and China concerns. The Eurozone appears to have some economic momentum after nearly a half-decade of sluggish growth, with Q2 GDP acceleration expected.

WHAT WE CAN LEARN BY GOING BACK TO SCHOOL

Expectations for the back to school shopping season are low, and this season may only be flat versus last year. Several consumer spending tailwinds suggest the consumer discretionary sector may be poised to outperform through year-end.

SUMMER GROWTH CONCERNS

Fixed income markets showed signs of a growth scare in July 2015, with lower real yields, lower inflation expectations, and a flatter yield curve. The markets’ reaction may be a signal to the Fed that September 2015 is too early for an interest rate increase. Recent growth concerns may be creating opportunities.​

PRODUCTIVITY PUZZLE

The declining labor force participation rate continues to receive attention from the media and the public, although largely ignored by the markets. We continue to expect the U.S. economy could potentially create between 225,000 and 250,000 net new jobs per month in 2015. Labor force growth plus productivity growth are important indicators for long-term economic growth.

TANGLED UP IN EU

Although some European countries have made progress with structural reforms, much more work is needed. The lack of progress on many structural reforms in countries outside of Germany continues to weigh on the Eurozone’s global competiveness. The verdict is still out on Greece and its promised structural reforms.

CHINA’S EFFECT ON EMERGING MARKETS DEBT

Emerging markets debt (EMD) spreads have moved above 4%, a level that has attracted buying interest in recent years. EMD is more sensitive to interest rates than the broad U.S. fixed income market. We continue to favor high-yield bonds due to their lower interest rate sensitivity.

PARSING PUERTO RICO

Puerto Rico’s debt crisis remains isolated and not symptomatic of the broad municipal bond market. Signs of contagion have not materialized and appear unlikely, although the probability of a default has increased. Puerto Rico bond prices largely reflect a default and are trading close to anticipated recovery values.

JULY 2015 BEIGE BOOK: WINDOW ON MAIN STREET

The latest Beige Book suggests that the U.S. economy is still growing at or above its long-term trend, and that some upward wage pressures continue to emerge. Optimism regarding the economic outlook far outweighed pessimism throughout the Beige Book, as it has for the past two years or so. Our new Beige Book Barometer for the three Fed districts with the most energy-related economic activity reveals more weakness.

OIL’S LONG BOTTOMING PROCESS

The additional supply expected from Iran and the slow response by producers to reduce supply may lengthen oil’s stay in the $5 0– 60 range. We have tempered our previous enthusiasm for the energy sector and at current oil price levels view it as a market performer.

Q2 EARNINGS PREVIEW

Q2 earnings season may look a lot like Q1 as companies once again face the twin drags of the energy downturn and strong U.S. dollar. Corporate America may impress in other ways, such as its resilience to the latest Greece and China flare-ups. As earning season progresses, we will watch for evidence that earnings will accelerate in the second half.

THE FUTURE IS ALREADY HERE

Due to still expensive valuations and low yields, we believe the current low-return environment could potentially persist for high-quality bonds for several years. Rising interest rate risk and still declining income generation pose an additional challenge.

GAUGING GLOBAL GROWTH: AN UPDATE FOR 2015 & 2016

As companies report second quarter 2015 results, the health of the global economy will likely get plenty of attention. The U.S., China, the Eurozone, and Japan account for nearly two-thirds of global economic activity; thus, these areas are where global growth matters the most. The market continues to expect that global GDP growth will accelerate in 2015, 2016, and 2017, aided by lower oil prices and stimulus from two of the three leading central banks in the world.

WHAT DO BONDS SAY ABOUT GREECE

Bond market’s reaction to Greek events has been muted so far and justifiably so. Key safety nets put in place by the European Central Bank and policymakers in recent years support limited bond market impacts. The growth trend continues to dominate long-term bond prices and yields despite unfolding Greek events.

GREECE PLAYBOOK

The referendum result this weekend throws Greece’s future in the currency union firmly in doubt. Here we address the question of whether the heightened risk of a Greek exit from the Eurozone might lead to contagion for global markets. We do not believe Greece is another “Lehman moment” and it may present an attractive buying opportunity for European equities.

THE FED AFTER THE “NO”

Our view remains that the Fed is on track to hike rates for the first time in this cycle in late 2015. The longer the uncertainty around Greece lingers, the greater the odds that the Fed doesn’t hike rates until early 2016. A decisive upturn in wage inflation remains key to moving inflation and inflation expectations higher.

STATE OF THE STATES

Municipal supply has been a headwind for much of 2015 but appears to be tapering off ahead of a typical summer slowdown. Over the longer term, still tight state budgets may keep broader municipal supply restrained and limit growth of the overall municipal bond market, which could become a tailwind. Despite the constant flow of negative headlines, primarily from Puerto Rico, the overall credit quality of the municipal market appears to be on solid footing.

CLASSIC DRIVERS OF BOND YIELDS PUSH HIGHER

Better economic growth and higher inflation expectations are driving confidence in the trajectory of the global economy. Lower yields and lingering price pressures still point to a very low-return environment for high-quality bonds in 2015. The combination of corporate and Treasury supply may keep headwinds on bond investors.

DEBUNKING DOW THEORY

We do not believe transports’ weakness is a signal of an impending economic and market downturn. Historical data suggest transports’ underperformance may actually be signaling a buying opportunity for the S&P 500 rather than a sell. We believe transports present an attractive investment opportunity for the second half of 2015.

HAMMER FLAT: MIDYEAR BOND MARKET OUTLOOK

We continue to expect roughly flat bond returns for 2015, as the choppy market environment witnessed over the first half of 2015 continues. The challenging, low-return environment confronting bond investors is likely to persist.

PUTTING THE PIECES TOGETHER

We continue to expect the U.S. economy will expand at a rate of 3% or slightly higher over the remainder of 2015. Good old American know-how continues to be in demand. Overseas, monetary policies continue to drive global growth, impacting most of the largest international economies.

BATTERIES NOT INCLUDED: MIDYEAR STOCK MARKET OUTLOOK

We believe corporate America will provide a much needed boost for the second half — providing the seventh year of positive returns in 2015, in the 5 – 9% range we forecast. Our forecast is based on expected mid-single-digit EPS growth for S&P 500 companies, supported by improved global economic growth, stable profit margins, and share buybacks in 2015, with limited help from valuation expansion.

BEIGE BOOK: WINDOW ON MAIN STREET 6/8/15

The latest Beige Book suggests that the U.S. economy is still growing at a pace that is at or above its long-term trend, and that some upward pressure on wages is beginning to emerge. Optimism regarding the economic outlook far outweighed pessimism throughout the Beige Book, as it has for the past two years or so.

ACA RULING COULD MAKE HEALTHCARE SECTOR MORE AFFORDABLE

The upcoming ACA Supreme Court decision may create a buying opportunity for the healthcare sector. We believe the odds favor the status quo, meaning that any selling pressure related to the risk of losing insured patients may present a buying opportunity.

MUNICIPAL CHALLENGES

We see a potentially brighter future ahead for municipal bonds, despite a difficult second quarter thus far, due to still attractive valuations, higher yields, and a favorable summer seasonal period. A low-single-digit total return is plausible given our expectation for a modest rise in interest rates coupled with valuation improvement relative to Treasuries.

BOND TUG-OF-WAR

Lingering uncertainty over Greece, U.S. economic growth, and the Fed may continue to create a tug-of-war on bond prices that will likely continue to lead to a low-return environment. We believe additional bond market strength is likely limited.

GRADING THE FED’S QE PROGRAM: WEEK 3

We give the Fed partial credit on equity and bond market impact. The U.S. equity market performed exceptionally well during all three QE rounds, with the broad stock market increasing by 164%, as measured by the Russell 3000. The Fed partially helped lower bond yields (and boost bond returns) during its QE program.

GLOBAL EARNINGS UPDATE: THE TIDE IS TURNING

European earnings have surprised on the upside while guidance has led to rising estimates, contributing to strong recent performance by European stocks. Japan’s first quarter revenue growth outpaced both the U.S. and Europe, while Japanese companies beat revenue forecasts at a solid rate.

THE GREEK DRAMA

Greece is unlikely to maintain its debt repayment schedule without a resolution. A default and a Greek exit may add volatility to the equity markets, but do not appear to present a systemic risk at this point.

GRADING THE FED’S QE PROGRAM: WEEK 2

With six months of economic and market data since the end of QE, we assess the latest round of the program that ended in October 2014. We focus on the Fed’s dual mandate to promote low and stable inflation and maximum employment. We give the Fed a pass on the unemployment rate, but have to assign a failing grade on its progress with inflation.

KNOW YOUR BREAKEVEN

A lack of liquidity continues to plague the bond market, as indicated by elevated dealer holdings of long-term bonds and light trading volume. Volatility may remain elevated in the short term. Knowing your breakeven can help bond investors assess how resistant their current portfolio is to rising interest rates, and identify areas that offer value.

GRADING THE FED’S QE PROGRAM: A MULTI-WEEK GROUP PROJECT

With six months of economic and market data since the end of QE, we assess the latest round of the program that ended in October 2014. We focus on QE’s impact on the banking and financial sector, by examining the amount of financial stress in the system, which overall has decreased since the beginning of QE in November 2008. We give the Fed a “pass” on QE as it relates to banking and financial system stress.

LETTERMAN TRIBUTE: TOP 10 KEYS FOR STOCKS

This week we pay tribute to David Letterman’s last Late Show with our own top 10 list: the top 10 keys for stocks. A potential snapback in the U.S. economy is the number one issue for the stock market, but here we list nine other issues that will be important in determining where stocks go in the near term.

TAPER TANTRUM REDUX

Unlike the taper tantrum, which was driven by fears over the end of Fed stimulus, the current pullback is being driven by a position imbalance in our view. Lower-rated bond sectors have fared best during the pullback. A lower allocation to bonds overall may still be warranted, given the lack of opportunity and reduced protection offered by still historically low yields and high valuations.

EARNINGS RECAP: GOOD ENOUGH?

The S&P 500 is on track to post year-over-year earnings growth of about 2% in the first quarter — a solid result considering the significant drags from the oil downturn and strong U.S. dollar. Healthcare led the upside, followed by energy, technology, and financials, while industrials struggled.

WATCHING WAGES

While wage growth has been tepid recently, 67 industries have seen wages increase at double the average (21% per annum), with good old American know-how roles well represented. The April employment report suggests wage growth likely remains a concern for Fed policymakers as they debate when to begin raising rates. Our view remains that the Fed may begin to hike rates in late 2015.

EMERGING MARKETS MAY MAKE A GOOD DRAFT PICK TO ADD TO PORTFOLIOS

We believe emerging markets (EM) score well when evaluated along some of the same criteria that NFL football teams use to assess potential draft picks: speed, strength, value, upside potential, and character. According to our evaluation, EM scores very well on the first four metrics, and the fifth — character — is sufficiently discounted in terms of policy and corporate governance risks. EM may make a good draft pick to add to your portfolios.

MADE IN EUROPE

Europe bond weakness spilled over to the U.S. as investors look past week domestic data and forward to a better second half of 2015. Fading U.S. dollar strength, better growth in Europe, and the rebound in oil prices point to a reversal of the lower inflation expectations that powered bond strength for most of 2014 and early 2015.

CONSUMER CONSISTENCY

Since the peak in oil prices in June 2014, consumers saved some, spent some on nonessential items, and paid down some debt, even as measures of consumer sentiment soared. The big drop in gasoline prices has not provided a big lift to the consumer sector, which continues to struggle in this recovery, nor did it change the overall tepid trajectory of consumer spending.

CROSS CURRENTS

Intermediate to long-term Treasury yields increased by 0.01% to 0.11% for the week ending April 24, 2015, despite weaker economic data. Fed rate hike expectations reached their most marketfriendly point. Rate hike expectations remain notably below the Fed’s recently reduced rate forecasts by a roughly 50% margin over the next three years.

A WEAK WEEK?

First quarter economic weakness will likely get plenty of attention this week, when the initial estimate of Q1 2015 GDP is expected to confirm tepid growth during the quarter. We continue to expect that the FOMC will begin to raise rates in late 2015, when it is “reasonably confident” that inflation will move back to its 2% objective over the medium term. Economic performance since the end of the recession has varied widely by state, with oil playing a key role.

RISK MARCHES ON

Investors continued to embrace risk this past week as the Nasdaq reached a new high while peripheral European bonds and emerging market equities rallied. Regional economic growth continues to diverge but slowly moves ahead, largely pushed by internal demand and supported by liberal monetary policy.

FOREIGN FACTORS

Foreign buying of U.S. bonds has slowed over recent years but remains a firm source of demand in the domestic bond market. Foreign purchases are likely to continue to take a backseat to economic growth and Federal Reserve interest rate expectations as a driver of bond prices and yields.

SIZING UP SMALL CAPS

The Russell 2000 Index hit a fresh all-time high last week (on tax day, April 15, 2015) and has outpaced large caps by 205 basis points (2.05%) year to date. Although valuations are on the high side, the factors that have driven recent small cap strength, in our view, remain largely intact. Small cap technicals appear bullish, with positive relative strength and an upward sloping 40-week moving average.​

BEIGE BOOK: WINDOW ON MAIN STREET 4/20/15

The latest Beige Book suggests that the U.S. economy is still growing at a pace that is at or above its long-term trend, and that some upward pressure on wages is beginning to emerge. Optimism regarding the economic outlook far outweighed pessimism throughout the Beige Book as it has for the

SOFT START TO Q2

Bonds started the second quarter on a weak note as investors anticipate economic improvement during the second quarter. However, bond market pricing indicates the Fed may never get back to “normal” and that rates will remain lower for longer. We expect yields to start to move higher in the second quarter, but until more clarity develops, bonds yields may drift at the lower end of their recent range.​

GAUGING GLOBAL GROWTH 4/13/15

The market continues to expect that global GDP growth will accelerate in 2015, 2016, and 2017, aided by lower oil prices and stimulus from the BOJ and the ECB, two of the three leading central banks in the world. The prospect for another year of decelerating growth in emerging markets remains a concern for some investors, who may still be waiting (in vain) for China to post 10 – 12% growth rates, as it consistently did during the early to mid-2000s.

CHINA: NEW YEAR, NEW OPPORTUNITY?

Regardless of whether China hits its 7% GDP target for Q1, its stock market has already been positive so far this year. Despite strong recent performance, Chinese stocks may see further gains. We maintain our positive view of broad EM, with a preference for Asia.

TRANSITIONING TO A RANGE TRADE

We believe the solid Q1 2015 broad bond market performance is unlikely to be sustainable for the duration of the year. The development of a range-bound environment may slow returns in the coming months.​

EARNINGS RECESSION?

First quarter 2015 earnings may produce the first year-over-year decline since the financial crisis due to the drags of low oil prices and the strong dollar. Results for S&P 500 companies may exceed dramatically reduced expectations. We continue to expect earnings to drive stock market gains in 2015, as we stated in our Outlook 2015: In Transit, and we see better earnings prospects as the year progresses.​

WORDS WITH FRIENDS

Examining the number of mentions of certain buzzwords across news stories, we see a pattern of spikes that are followed by consistent declines over time. While these buzzwords come and go, earnings and earnings guidance are near constants in news stories — as they are the ultimate drivers of equity prices.​

MUNICIPAL SUPPLY SURGE

The sharp increase in new municipal issuance has been driven by issuers refinancing existing debt, making the recent surge far less of a risk to the market. We do not see recent new issuance changing the favorable supply-demand underpinning the municipal bond market.

MARKET’S MARCH MADNESS

The Final Four of the 2015 NCAA College Basketball Tournament is set with Kentucky, Wisconsin, Duke, and Michigan State headed to Indianapolis to determine this year’s college hoops champion. In that spirit, we share our own Final Four for stock market investing:

MARCH EMPLOYMENT REPORT PREVIEW

We continue to expect the broad economy could potentially create between 225,000 and 250,000 net new jobs per month in 2015. Although job growth has improved, wage inflation, an important measure of labor market health, is not yet back to “normal.” A more robust pace of job growth should coincide with an upturn in wage inflation, yet the relationship between the two has been mixed over the past 30 years or so.

Portfolio Compass 3/25/15

A snapshot of LPL Financial Research’s views on equity, equity sectors, fixed income, and alternative asset classes. This biweekly publication illustrates our current views and will change as needed over a 3- to 12-month time horizon.

BREAKING UP IS HARD TO DO

The high-yield energy sector has kept pace with the broader high-yield bond market in 2015 even as oil prices weakened, a notable difference from 2014. Although we don’t believe the high-yield bond market will return to the June 2014 peak, the current yield spread may still represent good value given still strong corporate fundamentals and low defaults.

THE DOLLAR’S RIPPLE EFFECT

Using intermarket analysis is important to reduce the risk of missing vital directional clues within the financial markets. Recently, a strong U.S. dollar has created headwinds for the euro, crude oil, and commodity-sensitive emerging markets.

FORECAST FOR CLEAR SKIES: LEI SHOWS LOW ODDS OF RECESSION

The outcome of last week’s FOMC meeting confirmed our long-held view that the Fed would keep rates “lower for longer.” A report that may have been overlooked by financial market participants last week is the LEI, which is designed to predict the future path of the economy. The LEI suggests the risk of recession in the next 12 months is negligible (4%), but not zero.

PATIENTLY WAITING

The Fed faces a number of obstacles now and may require greater justification to suggest raising interest rates as soon as June. Bond market reaction to recent Fed meetings has been initially bearish but muted overall. Maintaining the word “patient” could have different implications for segments of the bond market.

FOMC PREVIEW: WHEN, HOW OFTEN, AND HOW MUCH

What the FOMC says, if anything, about the rising dollar and its implications, could have ramifications for monetary policy over the next several quarters and beyond. In addition to “when,” market participants may start asking “how much” and “how fast” rates may increase once the Fed begins to raise the rates. We are watching several factors to gauge when the Fed may begin to hike rates, including wages, the output gap, inflation, and inflation expectations.

DOLLAR STRENGTH IS A SYMPTOM, NOT A CAUSE

We do not think the strong U.S. dollar will derail the bull market. The dollar itself is not a key driver of market performance; it is a symptom.

TIPS & RISING INFLATION EXPECTATIONS

Market-implied inflation expectations have increased after reaching a multiyear low in mid-January 2015. Thus far in 2015, the inflation protection provided by Treasury Inflation-Protected Securities (TIPS) has provided a buffer, with TIPS outperforming Treasuries.

HAPPY BIRTHDAY BULL MARKET

The current bull market celebrates its sixth birthday today (March 9, 2015). Bull markets do not die of old age, they die of excesses, and we do not see evidence of excesses emerging today. Some of our favorite leading indicators suggest the economic expansion and bull market may continue through the end of 2015.

HOT & COLD BONDS

January 2015 was the best month for high-quality bonds since December 2008. In February 2015, high-quality bonds posted their worst monthly performance since June 2013 and the taper tantrum sell-off. High-yield bonds experienced ups and downs thus far in 2015. After a muted January, high-yield bonds returned 2.4% in February, the largest single month gain since October 2013.

A VERY DIFFERENT NASDAQ

The Nasdaq Composite just hit 5000 today as this report was going to press and is nearing its all-time record closing high of 5048. Even with the Nasdaq at 5000, we do not believe stocks have reached bubble territory. The Nasdaq has a much stronger foundation today of valuations, profits, and sentiment.​

REASSESSING INTEREST RATE RISK

We do not expect the weakness witnessed in 2013, but a difficult February 2015 thus far warrants another look at assessing interest rate risk, especially given the likely start of Federal Reserve (Fed) interest rate hikes later this year. Sector allocation, maturity exposure, time horizon, and whether interest income is reinvested or simply spent, all influence potential total returns during a potential bear market for bonds.

HOUSING HEALTH

We continue to expect housing may add to GDP growth in 2015 and for the next several years, as the market normalizes following the severe housing bust of 2005 – 2010. Poor weather in Q1 2015 may again cause housing to be a drag on growth early in 2015.

ARE EXPECTATIONS TOO HIGH?

The market’s continued ascent has caused some to ask if the stock market reflects excessive optimism. The pace of economic surprises as measured by the Citigroup Economic Surprise Index suggests expectations remain reasonable.

PUERTO RICO PUTTERS

Puerto Rico municipal bond price volatility picked up following the strike down of the restructuring law, as the market began to price in the prospect of a broader default. The impact on the broader municipal market is still limited, as has been the case for much of the past 18 months. Default risk for Puerto Rico remains but we still find the broader municipal bond market attractive.

ENERGY SECTOR OUTLOOK:WHAT WE ARE WATCHING

We are watching several key factors to assess the potential opportunity in the energy sector. While we expect to try to take advantage of opportunities in this group in short order, we are not convinced that it now presents a great entry point. We continue to recommend the consumer discretionary sector, where suitable, as a way to play low energy prices.

GLOBAL GDP TRACKER

The market continues to expect that global GDP growth will accelerate in 2015 and 2016, aided by lower oil prices and stimulus from two of the three leading central banks in the world. The consensus has been raising its estimate for 2015 growth for developed economies and sharply lowering its estimate for emerging markets.

DECIPHERING NEGATIVE YIELDS

The negative bond yield club is exclusively comprised of European issuers reflecting the ongoing deflationary environment, poor growth expectations, euro currency risks, and negative overnight borrowing rates at selected central banks. Overseas-based bond investors may have several reasons to purchase bonds with negative yields, but, to no surprise, none of those are compelling enough for U.S.-based investors.​

EARNINGS SEASON HIGHLIGHTS AND LOWLIGHTS

look at some of the highlights and lowlights of fourth quarter earnings season. Despite the massive drag from the energy sector and the negative impact of a strong U.S. dollar, fourth quarter 2014 earnings are on track to exceed prior estimates.

EUROPE: THE ROAD TO RECOVERY?

Although it is too soon to gauge the effectiveness of QE in the Eurozone, key readings and data are beginning to show improvement, and consensus expectations are for continued growth in 2015. However, market participants looking for an immediate and sustained response by the Eurozone economy to QE may be disappointed.

WHY OWN BONDS?

A soft start for the U.S. stock market in 2015 once again illustrates the diversification benefit of high-quality bonds even at very low yields. Even in a low-yield environment, bonds provide a cushion as price movements, not yields, are the primary buffer to equity movements. An allocation to core bonds, in addition to more attractively valued high-yield bonds, may make sense for investors.

DON’T FRET ABOUT JANUARY EFFECT

The stock market fell in January, causing some to ask whether the so-called January effect means that stocks will fall this year. Recall less than four weeks ago the “first five days” indicator sent a positive stock market signal for 2015. We always put fundamentals first when forecasting stock market direction—and on that score, we believe stocks still look good.

JANUARY EMPLOYMENT REPORT PREVIEW

The market is expecting the economy to add 235,000 net new jobs in January 2015 and for the unemployment rate to remain at 5.6%. Other measures of the health of the labor market — hiring rates, the quit rate, the unemployment rate, and most importantly, wages — still show that the labor market is not yet back to normal.

ALL ABOUT THE CENTRAL BANK(S)

Recent central bank action has reinforced the “lower for longer” interest rate theme in global bond markets. This week’s Fed meeting may temper marketfriendly central bank trends, but seems unlikely to alter the current environment.

NAVIGATING THE MARKETS 1/26

We are initiating a master limited partnership (MLP) view (neutral/positive) and introducing several new alternative investment categories. ƒƒUpgrading technology and industrials to positive and munis (int.) to neutral/positive.

NO DEFLATING THE U.S. DOLLAR

The latest leg up for the U.S. dollar has been driven by anticipation and arrival of QE by the ECB. The dollar has been strong for a number of reasons, all of them good things. Though not the end all and be all, currency is an important consideration when determining asset allocation.

GAUGING GLOBAL GROWTH

The pace of growth in the global economy is a key driver of global earnings growth, and ultimately, the performance of global equity markets. The IMF raised its estimate for growth in 2015 for developed economies and sharply lowered its estimate for emerging markets.

TAKING A PAGE FROM THE FED

The ECB is widely expected to announce a Fed-style outright government bond purchase program this week. A large and bold plan may arrest the rise in global government bond prices, but anything else may reinforce the record low-yield environment.

BEIGE BOOK - January 2015

The latest Beige Book reflected a picture of the U.S. economy that was largely unaffected by concerns over dropping oil prices, the 2014 holiday shopping season, global growth scares, and a rising U.S. dollar, although the drop in oil prices was noted as a negative in some districts.

EUROPEAN HEAD FAKE?

The much anticipated European Central Bank (ECB) policy meeting this week may include a quantitative easing (QE) program announcement. Although we would view a potentially bold QE program from the ECB as an incremental positive, the ongoing growth and deflation challenges in Europe leave us still with a strong preference for the U.S.

WHAT IS DRIVING BOND YIELDS?

The fall in 10- and 30-year Treasury yields over the second half of 2014 has been driven primarily by falling inflation expectations, rather than concern over the health of the U.S. economy. The decline in European government yields, unlike U.S. Treasuries, reflects both bleak growth prospects and lower inflation expectations.

DRILLING INTO THE LABOR MARKET

The U.S. economy created another 252,000 net new jobs in December 2014 and 3 million over the course of 2014, with the most net new jobs added since 1999. The labor market still has a long way to go to get back to “normal,” which may keep the Fed on hold for raising rates until late 2015.

THE BRIGHT SIDE OF CHEAP OIL

Earnings season is here and the impact of low oil prices will be the market’s main focus. While we will be closely monitoring the energy sector, we will also be watching the sectors and industries that potentially benefit the most from cheap oil. The consumer discretionary sector and the transports are big potential beneficiaries, supporting our positive views of both groups.

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.

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...

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...

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?

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...

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...​

 
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