New Market Signals Podcast

Chief Strategist Ryan Detrick, Equity Strategist Jeffrey Buchbinder, and guest speaker Jason Hoody, Head of Investment Manager Research discuss why sustainable investing is a major trend that isn’t going away & the potential positive impact of environmental, social, and governance factors on returns. We also explore the strong earnings season and recent retail sales during this week’s Market Signals.

Daily Insights

US stocks open lower ahead of Federal Reserve Chair Jerome Powell’s Congressional testimony.

• The Nasdaq continues to underperform as rising rates pressure higher valuation technology stocks.
• European markets are mostly lower in midday trading.
• Asian stocks were mixed overnight with Hong Kong outperforming.

The S&P 500 Index on a 5-day losing streak

• The S&P 500 is down 5 days in a row for the first time since a 7-day losing streak in February 2020.
• The S&P 500 fell 11.5% during the last 5-day losing streak and is down only 1.5% during this losing streak.
• The 1.5% decline during this 5-day losing streak is the smallest since right ahead of the 2016 election.
• Only 35 days in 2020 saw a worse 1-day decline than the decline over the past 5 days.
• The smallest 5-day losing streak ever was 0.65% in July 1964.

Federal Reserve Chair appears before Congress

• Federal Reserve (Fed) Chair Jerome Powell begins his semi-annual testimony before Congress today.
• Powell’s primary job will be to maintain the Fed’s credibility that it won’t be overly reactive to a transitory lift in inflation.
• To accomplish that, Powell will also have to advance the argument that any lift in inflation will actually be transitory.

Rates likely to continue to climb, but there are forces that may slow down the pace

• Treasury yields started moving sharply higher in February, accelerating the rising rate trend in place since August 2020.
• Our base case is that rates will continue to rise as the economy improves, with an upper end for our projected year-end range at 1.75%.
• Forces that may contribute to slowing the pace of rising rates include Fed intervention, high savings demand, foreign buying, and short positioning.
• For more details on our view of rising rates and a look at how rates respond to recoveries historically, see today’s LPL Research Blog.

 Technical update

• The Nasdaq is leading benchmark indexes lower this morning, but still remains well above support derived from the late-January lows at 12,985.
• Below that level, the 100-day moving average has acted as support for the past 9 months and is rapidly rising, sitting at 12,455 as of yesterday’s close.

COVID-19 news

• The United States reported 53,000 new COVID-19 cases on Monday, down 4.6% week over week (source: COVID Tracking Project).
• The 7-day average number of cases continues to decline, although a temporary increase is expected due to weather disruptions in the Midwest.
• United Kingdom Prime Minister Boris Johnson says he is optimistic that social restrictions will be lifted by mid-late June 2021.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data are from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

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