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Market Update: 05-18-20

DOWNSIDE RISK REMAINS

John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial

Stocks fell last week, and many blamed the drop on high stock valuations, Federal Reserve Chairman Jerome Powell’s gloomy outlook, and rising US-China tensions. Perhaps investors also are increasingly skeptical about prospects for a smooth V-shaped recovery. Regardless, stocks may have been due for a pullback after gains in late March through April and could potentially have further to fall.

THREE BIG STORIES

We think the three biggest stories for investors in the last week were: 1) elevated stock market valuations, 2) Federal Reserve (Fed) Chair Jerome Powell’s gloomy outlook, and 3) rising US-China tensions. Elevated valuations. As stocks rallied more than 30% off the March 23 lows and earnings expectations were cut dramatically, stock valuations have become increasingly concerning for...

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