LPL Street View: How Confident America Really Is

As the US economy transitions from lockdowns—where 90% of Americans were under a stay-at-home order—to continued reopening, we assess the state of American consumer confidence to spend despite the persistent COVID-19 outbreak.

Reopening the economy should, in theory, clear the runway for takeoff, but consumers need the confidence to spend. “While the stock markets have recovered, and employment is getting better, consumer confidence remains very low,” explained LPL Chief Investment Officer Burt White. “The economy’s biggest anchor isn’t that we haven’t reopened—it’s that consumers lack the confidence to spend.”

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Why Munis May Want Joe Biden to Win

Historically it has been unwise to attempt to “play” the stock market ahead of an election in an attempt to position based on perceived implications of a president’s policies, but the municipal bond market may be more susceptible to the results of this election. As stimulus talks in Washington appear stalled but not officially over, we outline the potential for investment opportunity in the municipal bond market going forward.

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Three Reasons We Like Small Caps

Markets have come a long way since the March lows, but we believe there may be more room for stocks to run. Given the impressive economic recovery to date and improving underlying technical and fundamental conditions, we think small cap stocks in particular may have attractive growth potential. Despite election and COVID-19-related risks, we see further gains ahead.

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Earnings Growth is Approaching

How investors evaluate this earnings season will depend on their perspectives. We are likely to get a much smaller year-over-year decline in S&P 500 Index profits in the third quarter compared to the second quarter, which is good news. Consensus is calling for a roughly 20% year-over-year decline in earnings per share (EPS) according to FactSet’s estimate, but we expect quite a bit better [FIGURE 1].

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LPL Street View: Stocks and the Election Don’t Mix

As concern over the upcoming election continues to build,  one of the questions we’re getting is whether investors should sell ahead of the election for fear the party they don’t want to win takes over the White House.

As tempting as this might be, we would continue to focus on the economy instead. “Whoever wins the election in November is going to take over an improving economy and one that likely won’t see a recession in 2021—and that matters more to stocks,” explained LPL Financial Chief Market Strategist Ryan Detrick. “Not to mention that many gains were missed out under President Barack Obama and again under President Donald Trump, due to disagreement over their policies.”

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First and foremost, we wish President Donald Trump and First Lady Melania Trump a swift and full recovery. This October surprise raises the already high level of political uncertainty markets are dealing with as Election Day approaches. As market participants digest this news and consider the possibility that the President may not be able to fulfill his duties, markets may become more volatile. However, we believe Trump’s odds of beating the virus, as the United Kingdom’s Prime Minister Boris Johnson and Brazil’s President Jair Bolsonaro did, are quite good. As the President and first lady of the United States, Donald and Melania Trump will be monitored closely and have ready access to the best health care in the world.

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