The LPL Strategic & Tactical Asset Allocation Committee (STAAC) determines the firm’s investment outlook and asset allocation that helps define LPL Research’s investment models and overall strategic and tactical investment thinking and guidance. The committee is chaired by the chief investment officer and includes investment specialists from multiple investment disciplines and areas of focus. The STAAC meets weekly to foster a close monitoring of all global economic and capital markets conditions to ensure that all the latest information is being digested and incorporated into its investment thought.
INVESTMENT TAKEAWAYS
Stocks rose in July for the eighth month in nine supported by continued economic growth and a broadening out of market performance toward small caps and value sectors. The S&P 500, which gained 1.2% for the month, pulled back from record highs mid-month before selling pressure intensified in early August, putting the index near correction territory. Despite the 8.5% pullback, the S&P 500 was still up 9.9% year to date as of August 6. Focus among market participants shifted from the upcoming election and Federal Reserve (Fed) and toward macroeconomic factors, currency volatility, and leverage in the financial system. Meanwhile, geopolitical threats remain.
Within fixed income markets, the continued disinflation narrative pushed yields lower in July, which served to erase first half losses for the Bloomberg Aggregate Bond Index. High quality sectors, such as agency mortgage-backed securities and investment-grade corporate bonds outperformed. Additionally, the first few days of August, which saw heightened volatility in risk assets, served as a reminder that high-quality fixed income remains a good ballast within diversified portfolios as the flight-to-quality trade helped bonds.
- LPL’s STAAC maintains its tactical neutral stance on equities and modest overweight to fixed income, while actively monitoring
the stock market’s progress toward establishing a potential durable low. After the sharp August 5 selloff, equities are nearing an
attractive entry point. - Economic growth in the U.S. should outperform other developed markets. Amid headwinds to consumer spending, solid business
capital spending is expected to support overall domestic growth, albeit, potentially at below consensus levels. A 2024 recession is
unlikely. - The Committee remains comfortable with a balanced approach to market cap. High-quality small cap stocks are attractively
valued, but large cap companies enjoy superior earnings power and tend to outperform late cycle as the economy slows. - The Committee maintains a slight preference towards large cap growth amid AI-fueled earnings growth, but our technical analysis
work has started to turn a bit toward value which remains more attractively valued. - The STAAC’s regional preference remains U.S. over developed international and emerging markets (EM) due largely to superior
earnings and economic growth in the U.S. and significant volatility in the Japanese yen. - The STAAC continues to hold a strong overweight tilt in preferred securities as valuations remain attractive. However, the
risk/reward for core bond sectors (U.S. Treasury, agency mortgage-backed securities (MBS), investment-grade corporates) is
more attractive than plus sectors. In our view, adding duration isn’t attractive at current levels, and the STAAC remains neutral
relative to our benchmarks.
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IMPORTANT DISCLOSURES
Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. Precious metal investing involves greater fluctuation and potential for losses.
Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio.
Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
All index data from FactSet.
The Strategic and Tactical Asset Allocation Committee (STAAC) is a division of LPL Research.
Tracking #612970 (Exp. 08/2025)