COMPASS CHANGES

  • No changes

INVESTMENT TAKEAWAYS

  • Stock valuations remain favorable in our view even with the S&P 500 Index near our year-end fair value target of 3,000. We would consider raising this forecast if clarity on trade and monetary policy result in an improved earnings outlook.*
  • We maintain our slight preference for value due to attractive relative valuations, fiscal stimulus impacts, and our positive financials sector view.
  • As the business cycle ages, and the dollar’s uptrend potentially reverses, large caps may sustain market leadership.
  • Population growth, economic momentum, valuations, and prospects for progress on U.S.-China trade relations all favor emerging markets (EM).
  • Slower but still solid economic growth and modest inflationary pressure may be headwinds for fixed income. However, the pause by the Federal Reserve (Fed) and potential for a summer rate cut reduce the near-term risk of higher short-term interest rates.
  • We emphasize a blend of high-quality intermediate bonds, with a preference for investment-grade corporates (IGC) and mortgage-backed securities (MBS) over Treasuries, in suitable strategies. MBS can provide a diversifying source of yield within the investment-grade space, while economic growth has been supportive of IGCs. High-yield corporates could become an attractive alternative to equities on a risk-adjusted basis.
  • The past month was strong for U.S. large cap equities, and the S&P 500 is now firmly above the 2018 highs (near 2,930) which may be viewed as tactical support going forward. Importantly, cyclical sectors led the recent advance, while more defensive sectors such as real estate and utilities lagged, something that will likely be necessary for continued gains.

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IMPORTANT DISCLOSURES

All performance referenced is historical and is no guarantee of future results.

There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to effect some of the strategies.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

This Research material was prepared by LPL Financial, LLC.

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