OUT OF THE WOODS?
John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial
Are we out of the woods yet? After the fastest correction from a record high in the history of the S&P 500 Index, stocks staged an impressive comeback last week. The S&P 500 put together its best week since 2013, rallying more than 5% off the lows to bring its session win streak to six. This week we consider what this means moving forward, including what higher interest rates and rising inflation might mean for stocks.
Whether we are out of the woods yet is a tough question to answer with any confidence, but when we weigh the evidence, it appears the odds are good that the worst is behind us. The stock market’s strong fundamentals are supportive. U.S. economic growth is solid despite last week’s retail sales shortfall, which we attribute to temporary factors. Consumer and business confidence remain high, as personal spending and capital investment are both likely to get a boost from the new tax law. Inflation is rising, but remains relatively low when compared to historical averages. It also may not be as strong as the January Consumer Price Index (CPI) data initially suggested due to weather and other...