LPL Financial Research issued a new Portfolio Compass on July 10th. The full report can be sent upon request and here are a few highlights for you.
Navigating the Markets
We expect the S&P 500 to grind higher in the second half of the year with increased volatility.
Lingering fears over the Federal Reserve (Fed) reducing the pace of bond purchases has driven increased bond market volatility. We believe the bulk of the sell-off is behind us, but volatile trading will likely persist near term.
We are upgrading our consumer discretionary view due to the continued resilience in consumer spending and the benefits of the housing recovery.
Our upgraded health care view reflects our U.S. focus, gradually improving sector growth outlook, and robust product innovation.
China’s deteriorating growth trajectory and strength in the U.S. dollar have led to our lowered view of materials and energy. We expect crude oil to pull back into he $90s.
We remain cautious on the yield sectors (telecom and utilities) due to their interest rate sensitivity and rich valuations.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Fixed Income Notes
Over the balance of 2013, we believe intermediate maturity bonds provide a better risk/return trade-off compared to short-term bonds.
A favorable summer seasonal period for municipal bonds is likely delayed due to lingering supply pressures. On a positive note, signs of stability persist as higher yields and taxable equivalent yields above 7% on longer-term bonds appear to have begun to attract more consistent buying interest from investors.
Things to know about bonds: Intermediate-term bonds have maturities between 3 and 10 years. All bonds are subject to interest rate risk if sold prior to maturity. Municipal interest may be subject to alternative minimum tax. They are federally tax-free but may be subject to state and local tax.
Send me an email if you want the full report or wish to discuss how the data may pertain to you.
Until next week,
Susan R. Linkous