Research

Our year-end 2022 fair value S&P 500 target of 4,300-4,400 is 5% above the August 5 closing price at the midpoint. Bottom line, we still expect a growing economy, expanding earnings, and still-low and stable interest rates to fuel higher stock prices despite another likely full percentage point of Fed rate hikes this year, a sluggish economic growth outlook, and heightened geopolitical tensions.

Gains were significant across the board, with technology and small-cap companies leading the market higher. The mid-week rally sent the S&P 500 to its highest level since May and the Nasdaq to its highest level since April. Bond yields fell on expectations that the Fed's pressure to hike rates further might ease. After pausing on Thursday, stocks again ripped higher on Friday, aided, in part, by a report indicating improving consumer sentiment.

Stocks rose sharply in November after falling the prior two months, as the S&P 500 Index
returned nearly 11%. Progress on COVID-19 vaccines and post-election policy clarity
buoyed investor sentiment, offsetting surging COVID-19 cases in the United States and
many parts of the world. Credit-sensitive bonds such as high-yield corporates performed
well, while the Bloomberg Barclays Aggregate Bond Index rose a solid 0.98% as yields fell.
Our 2021 forecasts call for mid-to-high-single-digit gains for stocks and near-flat to lowsingle-

MORE THAN MOST YEARS, it’s hard to look ahead to the next year, to 2021, without looking back at 2020. A global pandemic, a massive economic collapse, a bear market, a surprisingly sharp reversal, a hotly contested election where passions ran high, the impact of lockdowns—it was an unusual year of extraordinary challenges. In 2021 it’s time to restart the engines, but things are going to look different, feel different. 2020
has changed us, the way we do business, the way we connect. It’s also shown us our constants, what works for us, and what we hold on to.

AT THE MIDPOINT of 2020, we’re mindful that it’s been an extremely challenging year so far in the United States and around the globe. We’re in the midst of a pandemic that continues to impact all of us, our communities, and our economies.

AT LPL RESEARCH, as we look forward to the year 2020 and a new decade, some key trends and market signals will be important to watch, including progress on U.S.-China trade discussions, an encouraging outlook from corporate America, and continued strength in consumer spending. Trade risk, slower global growth,

WHEN WE RELEASED our Outlook 2019 - FUNDAMENTAL: How to Focus on What Really Matters in the Markets in December 2018, financial markets were in disarray. Global investors were scared by uncertain monetary policy, fiscal and legislative discord, slowing economic growth, and slackening corporate profits. Despite the increased volatility, we continued to believe that market and economic fundamentals remained generally sound.

AFTER NEARLY 10 YEARS of witnessing the U.S. economy and stock market recover—and thrive—investors are starting to wonder if we’ve seen all this expansion and bull market have to offer. Despite the market weakness we saw at the end of 2018, at LPL Research we expect the U.S. economy to grow in 2019 and support gains for stocks.

Over the past eight years extraordinarily accommodative monetary policy has served as the primary catalyst for spurring continued economic growth in the U.S. and around the globe.

Stock markets, bond markets, the economy, policy — some years they push and pull on each other lightly as markets follow their own path; in others, one influence, such as monetary policy, dominates. But sometimes, often following a period of change, understanding the pushes and pulls and how they interact becomes a key to reassessing market dynamics for the next year and beyond.