LPL Portfolio compass 9-5-12

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<p> 1. LPL FINANCIAL RESEARCHPortfolio Compass September 5, 2012 Navigating the Markets Compass Changes The Portfolio Compass provides a snapshot of LPL Financial Researchs views on Equity Upgraded Precious Metals Commodities to Positive from Neutral/Positive. &amp; Alternative Asset Classes, the Equity Sectors, and Fixed Income. This biweekly Investment Takeaways publication illustrates our current views and will change as needed over a 3- to The S&amp;P 500 has returned 13% this year (as of September 4, 2012), just 12-month time horizon. above the high end of our forecast range for the year, as discussed in our 2012 Mid-Year Outlook.* Our near-term stock market view remains cautious. Reading the Portfolio Compass Within equities, we favor Growth over Value, and the business-spending Fundamental, technical, and valuation characteristics for each category are shown driven Technology and Industrials sectors over defensive sectors and by colored squares. Financials. Small Caps and Technology were top performers in August. Negative, neutral, or positive views are Prospects for more policy action in Europe have fueled a rebound in Large illustrated by a solid black bar positioned Foreign, based on the MSCI EAFE Index, since late July, although U.S. over the color scale, while an outlined black stocks continue to lead major regions in 2012. bar with an arrow indicates change and shows the previous view. We continue to favor economically sensitive fixed income sectors and their higher yields in general over interest rate sensitive sectors such as Treasuries. Rationales for our views are provided beneath each category. As Europes problems linger, our near-term view of economically sensitive fixed income, such as high-yield bonds, has become a bit more cautious. We continue to favor Precious Metals Commodities on prospects for more* LPL Financial provided this range based on our earnings per share monetary stimulus, strengthened by Federal Reserve (Fed) Chairman Bengrowth estimate for 2012, and a modest expansion in the price- Bernankes speech in Jackson Hole, WY, on August 31, ratio. Please see our 2012 Outlook and 2012 Mid-YearOutlook publications for further information. The S&amp;P 500 intermediate-term technical outlook is bullish, with a price target at 1460 for the fourth quarter of 2012. Shorter term, the daily price remains range-bound between 1400 support and 1420 resistance. Broad Asset Class Views LPL Financial Researchs views on stocks, bonds, cash, and alternatives are illustrated below. The positions of negative, neutral, or positive are indicated by the solid black compass needle, while an outlined needle shows a previous view. N e u t r al N e u t r al N e u t r al N e u t r al i ve i ve i ve i ve Po s Po s Po s Po sN e ga t N e ga t N e ga t N e ga t i t i ve i t i ve i t i ve i t i ve Stocks Bonds Cash Alternatives Member FINRA/SIPC Page 1 of 7 2. PORTFOLIO COMPASSEquity &amp; Alternative Asset ClassesFavor Precious Metals as Bernanke Leaves the Door Open for More Quantitative Easing atJackson Hole The S&amp;P 500 has returned 13% this year (as Fundamentals of September 4, 2012), slightly above the Technicals Valuations Negative high end of our forecast range for the year, as Positive Neutral discussed in our 2012 Mid-Year Outlook. Our near-term stock market view remains cautious. Large Growth n n n Small Caps outpaced their Mid and Large counterparts in August, as the stock market Large Value n n n rose 2% for the month, based on the Russell Favor Growth over Value due to superior earnings trends in slow-growth economy, attractive relative 3000 Index. We have a slight preference for valuations, and our positive Technology view. Large Caps, Growth leading in 2012. Style/Capitalization Mid and Large over Small, but our views are Mid Growth n n n generally aligned across capitalization. Mid Value n n n We continue to favor Growth due to its Lull in merger &amp; acquisition activity, our expectation of more stock market volatility, and weakening tendency to outperform in slow-growth relative strength have tempered our enthusiasm some for Mid Caps in recent months. environments and due to our preference Small Growth n n n for Technology, the biggest Growth sector, over Financials, the biggest Value sector. Small Value n n n Based on the Russell 3000 Indexes, Growth Risk of further stock market volatility tempers our near-term view of Small Caps, although August saw outperformed Value by 50 basis points this market capitalization cadre regain leadership it had displayed in late 2011 and early 2012. during August and leads by 300 basis points U.S. Stocks n n n year-to-date. Large Foreign n n n Prospects for more policy action in Europe have fueled a rebound in the MSCI EAFE Small Foreign n n n Region Index, the Large Foreign (developed) Emerging Markets n n n benchmark, although international developed Large Foreign outpaced U.S. stocks in August, but U.S. has led major regions including Emerging Markets market equities, and Emerging Markets in 2012. Prospects for more policy action in Europe have fueled a rebound in the region recently, but the equities, are still well behind their U.S. recession-riddled regions fiscal and debt problems are not over. Japans recovery from 2012s natural counterparts this year. Our Large Foreign disasters has been uneven. We continue to expect a soft landing in China. view remains negative amid recessionary REITs n n n REITs conditions in Europe and the ongoing debt Attractive yields, better July jobs report are supportive, but interest rate risk gives us some pause. and fiscal crisis. Our upgraded Precious Metals view reflects Industrial Metals n n prospects for more Federal Reserve Precious Metals n n Commodities stimulus, further strengthened by Fed Energy n n Chairman Bernankes speech in Jackson Hole, WY, on August 31, 2012. Our positive Agricultural n n Agriculture Commodities view reflects Our upgraded Precious Metals Commodities view reflects prospects for more Fed stimulus, strengthened by Fed severe Midwest U.S. drought conditions. Chairman Bernankes late August speech in Jackson Hole, WY. We continue to favor Agriculture Commodities amid severe drought conditions and do not see much value in the Oil Commodity in the mid-$90s. Non-Correlated Strategies Other Favor distressed assets...</p>