First, let me address a frequent question; “When will I receive my tax info from LPL”? The answer is the first batch of normal 1099’s will be sent out by LPL February 20^th. If you own securities that generate foreign dividends as an example, that tax info can be expected in mid to later March as are any corrected 1099’s. For those of you that view your accounts online in Account View, you may view your tax documents there after those dates. If you have questions, we are here as always to assist you.

In late December, 2018, the equity markets experienced volatility that made us all nervous. There was fear that a recession was possibly looming. LPL Research had confidence in stock valuations and investing fundamentals at that time, and it helped us maintain our focus on the long term despite the volatility of the markets during the end of last year. One year later with 20/20 hindsight, what appeared to be a bullish forecast for stocks may have been too conservative, and now we’re asking if stocks have come too far, too fast. December 2019’s stock market environment has been in some ways the opposite of December 2018’s. After a strong rally that has lifted stock valuations, the question now is whether investing fundamentals can continue to support 2019’s gains throughout 2020.

Stock market fundamentals have improved significantly over the past year. We’ve received clarity on the biggest market uncertainties: U.S.-China trade relations, the Federal Reserve (Fed) pivoting from rate hikes to rate cuts, and the United Kingdom’s exit from the European Union (Brexit). We’ve also seen a leadership transition at the European Central Bank and more production cuts by Saudi Arabia-led OPEC to help stabilize oil prices. These actions plus reduced trade tensions in other key international economies could be viewed as evidence that economic growth outside the United States has stabilized and may even be starting to pick up a bit, although it is not assured.

Investors have priced in a lot of this good news, and we think it’s possible that some potential 2020 gains have been pulled forward into late 2019. Stocks may need to be repriced over the next several months as investors wait for the economy and corporations to deliver against pricing, and that wait could be uncomfortable at times. Corporate earnings growth will likely be the driver of stock market gains, but that still may depend on more progress in trade negotiations. Negotiations on “phase two” of the U.S.-China trade talks could become bumpy, and that could lead to additional turbulence in the stock markets. Inflation could also pick up and trigger renewed fears of Fed rate hikes, although a slight increase in inflation is a sign of a healthy economy. Fallout from the impeachment, international economic data in decline, and the potential for a highly charged U.S. election also could lead to increased market uncertainty this year. While the strong market performance of 2019 may limit the magnitude of potential market advances in 2020, we still expect stock market gains this year.

A Fed committed to keeping interest rates at current levels and progress on trade can improve prospects for business investment and productivity growth, and has encouraged LPL Research to raise its profit forecasts as the year progresses. To help prepare for what we believe will be a dynamic—and possibly volatile—year ahead, please read LPL Research’s Outlook 2020: Bringing Markets Into Focus. If you would like a copy, we can forward it to you by request. Happy New Year to all – Mark

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Economic forecasts may not develop as predicted. Some of this research material has been prepared by LPL Financial. All indices are unmanaged and may not be invested into directly.  Reference material:  Preapproved LPL Financial letter dated 1/2/2020, tracking #1-931723.