Stock Market Gains Likely to Slow

Stock Market Gains Likely to Slow

May 25, 2021
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Stock Market Gains Likely To Slow

LPL Research explores how, as this bull market gets a little older, the pace of stock market gains will likely slow but does not expect pullbacks to last very long. Learn more in this week’s Weekly Market Commentary.

Daily Insights

U.S. equities higher amid pandemic recovery inflation concerns

  • The Nasdaq Composite is up 0.6% as growth names advance.
  • European stock are essentially flat through midday trading with the Euro Stoxx 50 off a fraction.
  • Asian equities were mixed with both China (Shanghai Composite) and Japan (Nikkei) markets marginally higher.

Wrapping up a remarkably strong earnings season

  • S&P 500 Index earnings for the first quarter are tracking to a remarkable 51.5% year-over-year increase, more than double the 24% increase reflected in March 31 estimates.
  • The consensus S&P 500 earnings estimate for the next four quarters has increased by an unusually strong 4.2% since earnings season began.
  • Year to date, the consensus S&P 500 earnings estimates for 2021 has increased by 12.6%, similar to the index’s 11-12% advance.

This week closes out first quarter earnings season with 13 S&P 500 companies reporting, which will bring the total to over 490.

Technical update

The S&P 500 went on a round trip last week, briefly testing the previous week’s low as well as the 50-day moving average before closing down at just 0.4%. Leadership leaned defensive, while cyclical value sectors moved broadly lower. This week we’ll be watching to see if the benchmark index can hold recent lows (4056), while short-term upside levels to eclipse are 4188 (Friday’s intraday high) and 4238 (all-time intraday high).

Week ahead

The following economic data is slated to be released this week:

Inflation, Inflation, Inflation

On the LPL Market Signals podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder dive into the hotter than expected recent inflation data and explains why massive inflation down the road is unlikely.

 

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any 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 information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data are from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

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