We are excited to announce the release of the LPL Research Midyear Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets, packed with the latest investment insights and market guidance to take you through the rest of the year. The Midyear Outlook combines the expertise of LPL’s team of analysts, strategists, economists, and investment specialists.
Providing updated views of current fundamentals and the things that should persist as shorter-term concerns fade, LPL Research's Midyear Outlook 2019 emphasizes four primary pillars for fundamental investing—policy, the economy, fixed income, and equities. As the headlines change daily, look to these pillars to help provide perspective on what really matters in the markets.
Policy
Though policy decisions can be confusing, they remain central to our economic and market outlooks. We continue to believe that economic (and political) self-interest will bring the United States and China back to the negotiating table. Until we see progress, though, trade uncertainty is the primary risk to all our forecasts.
Economy
Fundamentals have continued to support steady but moderate economic growth in 2019. Financial markets were more skeptical at the end of 2018, and recession calls were among the loudest they’ve been all cycle. So far, though, that outlook has failed to materialize.
Fixed Income
Bond prices have surged and yields have fallen this year due to four very powerful forces:
- Inflation
- Rate Hike Pause
- Investing in U.S. Treasuries
- Search for Income
Equities
To us, stocks’ rebound has hinged on a return to the fundamentals. The Fed’s decision to pause rate hikes was the catalyst for the reversal, as market participants no longer feared that the Fed might unnecessarily restrict growth. U.S. economic data also have generally supported a continued economic expansion, while businesses continue to find ways to effectively navigate the environment. Generally upbeat first quarter corporate earnings results gave investors another fundamental reason to bid stocks higher.
A Focus on Fundamentals
Even though the economic environment has become more challenging, the pillars of fundamental investing—policy, economy, fixed income, and equities—still appear sound to us. We will continue to monitor the impact of trade developments on the indicators we watch. For now, the odds of a near-term recession appear to remain low. U.S. stocks may endure periodic volatility as the bull market ages, but we encourage investors to focus on long-term trends instead of short-term noise. Volatility is the blessing—and curse—of long-term investing. During volatile periods, it can be tempting to make emotional, short term decisions that could conflict with long-term goals. But we could also view bouts of volatility as opportunities, when suitable, to rebalance portfolios toward long-term allocations. By focusing on the fundamentals, we believe we all can make more prudent and effective decisions about how to achieve our long-term goals.
Download the LPL Research Midyear Outlook 2019
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.
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. All performance referenced is historical and is no guarantee of future results.
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.
This Research material was prepared by LPL Financial, LLC.
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