LPL Research Releases 2024 Midyear Outlook: Still Waiting for the Turn
LPL Financial has released its 2024 Midyear Outlook titled 'Still Waiting for the Turn.' The report highlights continued economic growth in the U.S., exceeding expectations despite high inflation and late-cycle pressures. However, a potential slowdown is anticipated, with consumer spending expected to decelerate and labor market conditions projected to soften by year-end.
Geopolitical tensions, especially between the U.S. and China, and the upcoming U.S. presidential election are expected to increase market volatility. Key investment insights include the attractiveness of fixed income assets due to high Treasury yields and a cautious approach to equities owing to elevated valuations and potential volatility.
Chief Economist Jeffrey Roach noted the remarkable resilience of the U.S. economy, while Chief Investment Officer Marc Zabicki emphasized the importance of understanding market drivers to adapt investment strategies.
- Continued economic growth in the U.S. exceeds expectations.
- Fixed income assets are attractive due to high Treasury yields.
- Strong corporate earnings growth drives stock market gains.
- Potential slowdown in consumer spending and labor market by year-end.
- Market volatility expected to rise due to the U.S. presidential election.
Insights
The 2024 Midyear Outlook from LPL Research brings several points of interest for retail investors to analyze. The continued resilience of the U.S. economy in the face of high inflation and other late-cycle pressures stands out. Despite this, the forecast anticipates a potential deceleration in consumer spending and a softening in labor market conditions, which could signal caution for sectors heavily reliant on consumer spending. Investors should closely monitor economic indicators and adjust their portfolios to mitigate risks associated with these potential slowdowns.
From an investment standpoint, LPL highlights fixed income as an attractive asset class given rising Treasury yields. This is particularly relevant as the Federal Reserve is expected to cut rates by the end of the year, which traditionally drives fixed income value. On the equities side, despite strong gains in the first half of the year, high valuations and the impending U.S. presidential election introduce potential volatility. A cautious approach to equity investments may be prudent.
In addition, the geopolitical landscape, especially U.S.-China trade relations, continues to influence global markets. Investors should be aware of these dynamics when considering international exposure. Overall, the Outlook provides solid guidance on navigating the current economic conditions while maintaining a long-term investment perspective.
In summary, while the U.S. economy shows resilience, the anticipated slowdown in consumer spending and labor market softening warrants caution. The attractiveness of fixed income investments and potential volatility in equities suggest a diversified approach. Investors should remain vigilant of geopolitical influences and election-related market volatility.
The anticipated economic shifts highlighted in the report are critical for understanding market dynamics. The U.S. economy's resilience is noteworthy, but the expected slowdown in consumer spending and labor market conditions could present challenges. Investors should consider how these macroeconomic trends may impact different market sectors, particularly those dependent on consumer discretionary spending.
Another key highlight is the impact of geopolitical factors, including trade policies and tensions between the U.S. and China. These elements are important for global investment strategies, as they can affect everything from commodity prices to manufacturing supply chains. Investors should assess their international holdings in light of these geopolitical risks.
Additionally, the report underscores the significance of the U.S. presidential election on market volatility. Historically, election years bring increased market fluctuations and this year’s closely contested rematch amplifies that risk. Investors should factor in this potential volatility when making short-term investment decisions but maintain a long-term outlook to navigate through political uncertainties.
Overall, the Midyear Outlook emphasizes the importance of adapting investment strategies to evolving economic conditions. By understanding the potential impacts of consumer behavior, labor market trends, geopolitical tensions and political events, investors can better position themselves to manage risks and capitalize on opportunities.
This midyear market update offers fresh insights into the economic landscape and the potential impact for investment portfolios
SAN DIEGO, July 09, 2024 (GLOBE NEWSWIRE) -- LPL Financial LLC today released its 2024 Midyear Outlook, “Still Waiting for the Turn.” Expanding on LPL Research’s 2024 Outlook, “A Turning Point,” this midyear update offers fresh insights into the economic and market landscape, along with the potential impact for investment portfolios.
At the end of 2023, the LPL Research team posited that in 2024, the markets would make a definitive turn to a more recognizable place, marked by meaningful shifts in inflation, interest rates and recession risk. At midyear, LPL professionals are still waiting for that turn.
“Economic growth has continued to surprise to the upside,” said Jeffrey Roach, PhD, Chief Economist at LPL Financial. “The U.S. economy has continued to exhibit remarkable resilience, growing beyond expectations despite facing high inflation and other late-cycle pressures,” he added. However, the Outlook indicates a potential slowdown, with consumer spending expected to decelerate and labor market conditions expected to soften by the end of the year.
Key Highlights from the 2024 Midyear Economic Outlook:
- Anticipated Economic Shifts: While the economy remains robust and resilient, recent data suggests a forthcoming slowdown. The strong consumer spending we’ve seen is expected to decelerate, particularly on big-ticket items, and the labor market may soften, with the unemployment rate projected to rise in the latter half of the year.
- U.S. Presidential Election: As the closely contested rematch between Biden and Trump approaches, market volatility is expected to rise, a common trend in election years. Despite the political landscape’s influence and expected volatility, broader economic forces and corporate health remain key drivers of the market and economy. Regardless of what happens in November, investors should keep a long-term perspective.
- Global Market Considerations: The Outlook addresses the implications of geopolitical tensions and trade policies, particularly between the U.S. and China, which continue to influence global market dynamics and investment strategies.
- Investment Landscape: The report highlights several key areas for investors to consider:
- Fixed Income: With Treasury yields near their highest levels in decades, fixed income has become an attractive asset class. Investors are advised to focus on income generation over price appreciation, especially as the Federal Reserve is expected to cut rates by the end of the year.
- Equities: The stock market has enjoyed strong gains in the first half of the year, driven by anticipation of looser Fed policy and robust corporate earnings growth. However, elevated valuations and potential volatility, especially with the upcoming U.S. presidential election, suggest a more cautious approach moving forward.
“As we navigate a complex and shifting economic landscape, our Midyear Outlook serves as a crucial barometer for advisors, institutions and their clients,” says Marc Zabicki, Chief Investment Officer for LPL Financial. “Understanding the underlying factors driving market moves helps us to better prepare and adapt investment strategies to meet future challenges and opportunities.”
Important Disclosures
Please see the LPL Financial Research 2024 Midyear Outlook for additional description and disclosure.
The opinions, statements and forecasts presented herein are general information only and are not intended to provide specific investment advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.
Any forward-looking statements, including the economic forecasts, may not develop as predicted and are subject to change based on future market and other conditions.
Investing involves risk including the loss of principal.
The Standard & Poor’s (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization U.S. stocks. All indexes are unmanaged and cannot be invested into directly.
About LPL Financial
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