Broker Check

January 28, 2019 - Stocks Stage Late Week Rebound

| January 29, 2019

Solid gains on Friday helped major U.S. indexes overcome early-week losses, though the S&P 500 Index came up just short of notching its fifth straight weekly gain. The slow start came on the heels of reports that the White House rejected an offer to hold preparatory talks with Chinese officials ahead of next week’s formal trade negotiations, and reports that the International Monetary Fund cut its global growth forecasts for this year and next to 3.5% and 3.6%, respectively. Better-than-expected manufacturing and jobless claims data, and a solid Leading Economic Index (LEI) reading helped boost sentiment as the week progressed. The LEI, a component of our Recession Watch Dashboard, rose 4.3% year over year in December, suggesting the odds of a recession are low.

Overseas, investors shook off disappointing economic data that showed continued weakness in European business activity, which fell to more than five year lows according to Eurozone Composite Purchasing Managers Index (PMI) readings. In its monetary policy meeting, which concluded Thursday, the European Central Bank acknowledged that risks remain to the downside as economic data has deteriorated recently, and inflation has failed to sustain any upward momentum. The comments helped provide a tailwind that lifted regional indexes into positive territory for the week.

In Asia, Japan’s central bank voted to maintain its ultra-loose monetary policy as it continues to grapple with stubbornly-low inflation and deteriorating conditions in the country’s manufacturing sector. Data out this week showed that China’s economy continues to weaken as year-over-year gross domestic product (GDP) growth fell to 6.5% in 2018, its lowest level since at least 1990. Still, emerging markets equities continued to outperform foreign developed stocks as commodity prices sustained their upward momentum despite a modest rebound in the U.S. dollar. “Economic data out of China continues to add pressure on the Chinese to resolve U.S. trade issues and increases the odds of meaningful fresh stimulus,” said LPL Chief Investment Strategist John Lynch. “A potential U.S.-China trade agreement over the next several months would also have a stimulative effect that we think could help buoy emerging-market stocks.”

Earnings season marches along next week with 122 S&P 500 companies scheduled to report. The nonfarm payrolls report and the Conference Board’s Consumer Confidence Index will likely garner more attention than normal coming off a 35-day government shutdown. Overseas, fourth-quarter Eurozone GDP will be released, along a vote on U.K. Prime Minister Theresa May’s Brexit Plan B. In Asia, key data include Chinese Purchasing Managers’ Index. Track these and other important events on our Weekly Global Economic & Policy Calendar.


Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

Investing in foreign and emerging markets securities involves special additional risks. These risk include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

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.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor


For Client Use – Tracking #1-815840 (Exp. 1/20)