Repositioned for an Improving Macro Backdrop
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.
Key changes from STAAC in April:
- Upgraded U.S. equities to overweight
- Downgraded fixed income to underweight
- Downgraded MBS to underweight
- Upgraded small value to neutral
- Downgraded communication services to neutral
- Upgraded technology to overweight
- Upgraded view on energy commodities to positive
Investment Takeaways
U.S. equities bounced back in April with the S&P 500 surging over 10%, capping its best month since late-2020 at record levels. Optimism around a temporary ceasefire in the Middle East started the month off on a positive note, and signs that both sides were open to a diplomatic approach buoyed sentiment. While peace talks remained fluid and the Strait of Hormuz effectively closed, systematic buying and artificial intelligence (AI) enthusiasm were broadly flagged for the upside in stocks. April saw several deals unveiled in the AI space, while markets also refocused on fundamentals amid a stronger-than-average start to the first quarter earnings season and a resilient economic backdrop. Among earnings highlights, Magnificent Seven names highlighted insatiable AI demand and raised spending plans.
While equities were able to broadly shrug off geopolitical risks, bonds were more reflective of lingering uncertainty. Core bonds edged higher in April, measured by a 0.1% rise in the Bloomberg U.S. Aggregate Index, with Treasuries ending fractionally lower. Treasuries initially rallied on de-escalation hopes, before dropping again as inflation concerns, rising oil prices, and some hawkish Federal Reserve meeting takeaways sent prices back below the monthly flatline. Meanwhile, corporates outperformed and mortgage-backed securities ended fractionally higher.
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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.
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