4 Things That Really Matter For Stocks in 2021

4 Things That Really Matter For Stocks in 2021

March 16, 2021

4 Things That Really Matter For Stocks in 2021

This week on the LPL Market Signals podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discuss four things that matter the most for stocks in 2021.

Daily Insights

U.S. stocks open little changed ahead of Wednesday’s Federal Reserve statement

  • European markets are modestly higher in midday trading as investors shrug off concerns regarding the region’s vaccine rollout.
  • China outperforms as Asian stocks rose overnight despite government comments on technology company influence.

Federal Reserve FOMC preview

This week, the Federal Reserve (Fed) meets for their two-day Federal Open Market Committee (FOMC) meeting to discuss interest rates, bond purchases and updated growth and inflation expectations.

  • Questions we have include the path of short term interest rates, plans to change its bond buying behavior, and the extension of a key regulatory exemptions.
  • While we’re unlikely to get answers to all our questions, the Fed will remain an important story for fixed income markets.
  • For more on our preview of the FOMC meeting, see today’s LPL Research blog, available at 12pm ET.

Keep eyes ahead on earnings

  • We are nearing the one-year anniversary of the March 2020 bear market lows, and that’s often the time when stock valuations look most expensive if you use trailing year earnings.
  • Forward-looking earnings growth expectations, however, are robust and we believe there’s solid potential for an upside surprise to consensus, creating a strong prospect that stocks will be able to grow into elevated valuations.
  • When it comes to earnings and valuations, it’s an important time to keep eyes ahead.

More challenging policy path coming into focus with taxes a key issue

  • With stimulus behind them, the Biden administration’s policy focus moves to infrastructure.
  • The price tag on the bill will likely be large ($2 trillion is a reasonable initial estimate), but, unlike the stimulus bill, spread out over a decade.
  • If passed, an infrastructure bill would likely come with a tax increase on corporations and high earners, which may bring added scrutiny from Wall Street.
  • Our base case is that a bill will pass, but with taxes on the agenda and spending levels already elevated, the odds are higher that little gets done.

Retail Sales drop more than expected in February as winter storms disrupt consumer demand

  • S. retail sales fell 3% month over month according to the U.S. Census Bureau, below Bloomberg consensus forecasts of -0.5%.
  • Control group retail sales, which exclude food services, automobile dealers, building materials, and gasoline stations fell 3.5% month over month.
  • While February sales declined more than expected, January retail sales were revised up from 5.3% to 7.6% month over month.

Technical update

The S&P 500 Index overcame early losses to set a third consecutive record high on Monday. The afternoon rally was capped off by a 0.5% gain in the final 30 minutes of the session, though leadership leaned defensive as utilities and real estate were the top performing sectors amid a pullback in interest rates.

March Madness: Stock Market Edition

LPL Research share their “Final Four Factors” for the stock market in 2021. Learn more in this week’s Weekly Market Commentary .



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