Mark and Elise Levy’s October Economic Update
Rising Markets Climb Walls of Worry
For this month’s update, we’re sharing highlights from LPL’s most recent Weekly Market Commentary because it captures many of the same hopes — and concerns — we’re discussing with clients right now. We’re now in the fourth year of an impressive bull market, and many investors are asking, “What’s next?” Here’s what LPL Research is seeing:
Positive Factors:
Favorable Market Conditions: Lower bond yields and the possibility of additional Fed rate cuts continue to support equity markets.
AI-Driven Earnings Growth: Corporate investment in artificial intelligence is fueling double-digit earnings growth across several sectors.
Favorable Seasonality: Historically, this time of year has been positive for stocks, adding a seasonal tailwind.
Concerning Factors:
Labor Market Slowdown: The U.S. labor market is nearing “stall speed,” where job growth slows below population growth — a potential early sign of recession risk.
High Stock Valuations: The S&P 500’s price-to-earnings (P/E) ratio is near 28, levels last seen during the late-1990s tech boom, suggesting more modest long-term return expectations.
Rising Margin Debt: NYSE margin debt is up 32% since April, surpassing previous market run-ups and hinting at possible volatility ahead.
LPL Research’s Outlook:
LPL Research currently maintains a neutral stance on equities, anticipating that any pullbacks are likely to be shallow and could represent buying opportunities. Their Strategic and Tactical Asset Allocation Committee continues to favor growth-oriented investments over value and larger companies over smaller ones. Overall, while risks such as labor market weakness and elevated valuations persist, the broader fundamentals remain constructive. Low yields, resilient corporate profits, and the ongoing wave of AI-driven productivity gains continue to support a cautiously optimistic market outlook.
Contact us if you have any thoughts or concerns – Mark and Elise
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