• Downgraded real estate view from neutral/positive to neutral
  • Downgraded investment-grade corporate bonds from neutral/positive to neutral


  • Our S&P 500 Index year-end 2020 fair value target range of 3,250–3,300 is based on a price to-earnings (P/E) ratio of 18.75 and our 2020 S&P 500 earnings forecast of $175 per share.
  • Attractive valuations and solid economic growth favor emerging markets over developed foreign markets. The trade deal with China is supportive even though trade risk remains.
  • Fundamentals and yields appear good in real estate, but interest-rate sensitivity and our preference for cyclical sectors lead to our neutral view.
  • Slower but still solid economic growth and modest inflation may put upward pressure on yields, but trade uncertainty and the global appetite for U.S. Treasuries increase the likelihood they remain range bound.
  • We emphasize a blend of high-quality intermediate bonds, with an emphasis on mortgage backed securities (MBS) and underweight exposure to U.S. Treasuries in suitable strategies. MBS could provide a diversifying source of yield within the investment-grade space that may tolerate modestly rising rates better than other options.
  • High-yield corporates could be an attractive alternative to equities on a risk-adjusted basis.
  • While economic growth is supportive of investment-grade corporates, tight credit spreads and declining credit quality lead to our neutral view.
  • The global bull market continues, as the MSCI All Country World Index set a new record high in the past month, surpassing its January 2018 peak. Financials outperformance and breakout above pre financial crisis levels strengthen the bull case, as investors continue to rotate into more cyclical sectors.

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This Research material was prepared by LPL Financial, LLC.

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