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 closely monitor 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 August for the fourth straight month, supported by continued economic growth, accelerating earnings growth, and a broadening out of market performance beyond technology. The S&P 500 was more than 8% off its July 16 record closing high on its August 5 low before rallying to end the month to produce a 2.4% return. As September began, focus among market participants remained on upcoming Federal Reserve (Fed) rate cuts, the degree of softening in the labor markets, geopolitical risks, and leverage, which was a major contributor to the selloff in early August. Within fixed income markets, Treasury yields were lower in August as markets continue to expect deep rate cuts from the Fed, likely starting at the September Fed meeting. Current market pricing has the Fed cutting interest rates nearly 2% over the next 12 months as labor market weakness has become a larger concern for markets than inflation. The rate cutting expectations helped generate positive returns for most fixed income asset classes with the Bloomberg Aggregate Bond Index higher by 1.4% in August. High quality sectors, such as agency mortgage-backed securities and investment-grade corporate bonds outperformed.
LPL’s STAAC maintains its tactical neutral stance on equities and modest overweight to fixed income, while actively monitoring signs of a potential stock market correction as the calendar turns to the historically weak seasonal month of September and the presidential election approaches.
- 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 AI-fueled earnings on the growth side helps justify rich valuations, but our technical analysis work has started to turn a bit toward value, which remains more attractively valued than normal. Staying close to neutral seems prudent.
- 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 #626057 (Exp. 09/2025)