Macro View

Daily Insights

Big bank merger. Super-regional banks BB&T and SunTrust are combining in a $28 billion merger that will create the sixth largest U.S. bank. We have been encouraged by the pickup in loan demand and valuations in the space remain attractive in our view, though regional banks continue to struggle with a flat yield curvethat has prevented the marketplace from fully realizing the value. We maintain our positive view on financials, including banks, and are encouraged by the outperformance since the December 24th market low.

Evidence of another leg down in European growth continues to stream in. The European Commission cut its GDPgrowth forecast for 2019 from 1.9% to 1.3% overnight, warning that Brexit and China may worsen the outlook. Italy’s revision was the most negative, from 1.2% to 0.2%. The latest data told the same story, as industrial production in Germany contracted in December by 0.4%, versus expectations for 0.8% growth, suggesting the country may have entered a technical recession in the fourth quarter. In addition, the Bank of England cut its U.K. economic growth forecast for 2019 this morning-from 1.7% to 1.2%-and noted that Brexit risk had risen. Finally, Europe’s economic surprise indexes have lagged far behind those in the U.S., Japan, and China in recent months.

EM holding its own. Progress on U.S.-China trade talks, prospects for fiscal stimulus, the Federal Reserve (Fed) rate pause, and rising commodity prices all helped buoy sentiment in emerging market (EM) equities during January as the MSCI Emerging Markets Index returned 8.8% for the month (the MSCI EM Index is flat so far in February). Since the S&P 500 Index’srecord high on September 20, 2018, EM has returned 2%, ahead of the roughly 6% declines in both the S&P 500 and the developed international equity benchmark (MSCI EAFE).

Initial jobless claims lower. Weekly initial unemployment claims came in at 234K, above the 221K expected but below last week’s 253K. The four-week moving avg., a better gauge of labor market trends, also ticked up ~4.5K to ~225K; however, the 1.2% insured unemployment rate was unchanged from the prior reading and remains at multi-decade lows. Overall, the data continue to suggest the labor market, and by extension the U.S. economy, remain in good shape.

NEW Street View Video: Putting the Recent Market Rally into Context. Chief Investment Strategist John Lynch puts the most recent market rally off the lows into context, discusses market retests, and shares guidance on solid fundamentals. The video will be available this afternoon on the LPL Research blog, but you can watch it now.

Monitoring the Week Ahead

Click Here for our detailed Weekly Economic Calendar

Thursday

Friday

  • N/A

 
IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All performance referenced is historical and is no guarantee of future results.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured.  These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency.  The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.

Index data obtained via FactSet

Member FINRA/SIPC

For Public Use – Tracking # 1-820057 (Exp. 2/20)