A full circle approach with you at the center

COMPASS CHANGES

  • Upgraded financials view to neutral/positive from neutral
  • Upgraded industrial metals view to neutral from negative/neutral

INVESTMENT TAKEAWAYS

  • Our S&P 500 Index year-end 2020 fair value target range of 3,250–3,300 is based on a price to-earnings (P/E) ratio of 18.75 and our 2020 S&P 500 earnings forecast of $175 per share. With stocks at our year-end fair value target, the magnitude of a potential stock market advance in 2020 may be limited.
  • We favor large cap stocks as the business cycle ages and recommend balanced exposure between the growth and value styles in equity allocations.
  • Attractive valuations, solid economic growth may favor emerging markets over foreign developed markets. Trade deal with China may be supportive though trade risk remains.
  • Our upgraded financials sector view reflects an improved interest rate environment while valuations remain attractive.
  • Slower but still solid economic growth and modest inflation may put upward pressure on yields, but trade uncertainty and the global appetite for U.S. Treasuries increase the likelihood they remain range bound.
  • We emphasize a blend of high-quality intermediate bonds, with an emphasis on mortgage backed securities (MBS) and underweight exposure to U.S. Treasuries in suitable strategies. MBS could provide a diversifying source of yield within the investment-grade space that may tolerate modestly rising rates better than other options.
  • High-yield corporates could be an attractive alternative to equities on a risk-adjusted basis.
  • While economic growth is supportive of investment-grade corporates, tight credit spreads and declining credit quality lead to our neutral view.
  • The global stock rally continues to be buoyed by strong participation; however, with overly optimistic sentiment becoming a tactical risk, we see technical support near 3,030 on the S&P 500 Index.

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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.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

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