After one of the worst starts to a year for fixed income, returns may not get much better from here. Long-term interest rates have traded sideways recently but we expect rates to potentially rise further, which would put downward pressure on bond prices. We’re not giving up on high-quality fixed income though, as Treasury securities have shown to be the best diversifier during times of equity market stresses. 

The Case For (Still) Higher Treasury Yields

Interest rates have moved off their very low levels to start the year, but we think they can go higher. Higher inflation expectations, less involvement in the bon

U.S. and International Equities

The month of May proved to be mixed for the U.S. major market indexes. Last month’s top performer, the Nasdaq composite, was May’s laggard. International developed markets (MSCI EAFE) outperformed emerging markets (MSCI EM) last month as well.

Energy Powers Ahead

Energy completely reversed course with a very strong May after April’s showing as the worst performing sector. West Texas Intermediate’s (WTI) strong May performance helped drive the sector’s advance.  WTI crude has more than doubled over the past year. Financials had a s

The amount of negative yielding debt is shrinking and that’s a good sign that the global economic recovery is well underway. While negative yielding debt became prevalent in many non-U.S. countries after the Global Financial Crisis of 2008/09, the amount had surged to over $18 trillion due to the accommodative monetary policies adopted immediately after the COVID-19 shutdowns. As economies recover though and with the eventual normalization of monetary policy, interest rates have started to move higher and now many developed non-U.S. countries have bond yields at multi-year highs.

As seen in the LPL Research Chart of the Day,

U.S. and International Equities

The major US markets were higher this week, as market participants took concerns about inflation in stride.  US small caps (Russell 2000) equities were the best performing US asset class this week and continue to lead as we approach mid-year.  Going forward, LPL Research believes the early-stage bull market along with young economic expansion could continue to help small caps. Markets overseas finished higher, with the emerging market equities (MSCI EM) outperforming the developed markets (MSCI EAFE).

Earnings, Earnings, Earnings

S&P 500 Index earning