Investment-grade credit spreads, the extra yield you get from investment-grade corporate bonds compared to similarly dated US Treasuries, have already tightened to a level you usually only see during the middle of the economic cycle—and that can have consequences for bond investors. As shown in the LPL Chart of the Day, the current spread as of January 15 was at 1%, close to the tightest level of the previous cycle of 0.91%, hit in February 2018, and in the bottom quarter of all values going back to 1997.

 

“Corporate bonds will likely get support from an improving economic outlook as vaccines become more widely distrib

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Index Performance

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US and International Equities

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The major market indexes finished the week lower. In addition, many international markets followed in lockstep with their US counterparts. Emerging markets (MSCI EM Index) outperformed developed international markets (MSCI EAFE Index).

 

For the second week in a row, energy was a standout performer among its sector peers, while communication services, information technology, and consumer staples were among the laggards this week.

 

Energy Leading the Pack

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Building on its impressive start to the New Year last week, energy cont

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One of the top questions we’ve received recently has been what a blue wave may mean for investments. After the Democrats won the two Senate runoff elections in Georgia, they will now control the White House and both chambers of Congress. Our January 11 Market Policy Projections for 2021 gave some of the immediate and longer-term policy impacts of the Democratic “blue wave,” and here we surf the blue wave with some interesting charts.

 

First off, blue waves have not been bearish for stocks, with the S&P 500 Index higher 6 of the past 7 times and up a respectable 9.1% on average since 1950.

 

&nb

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Heading into 2020, we maintained our preference for growth stocks as we believed that earnings growth would become harder to come by as the economic cycle aged, and their robust earnings growth was greatly appealing. These same growth stocks bucked historical precedent and proved to be well insulated from the economic effects of the stay-at-home environment presented by the outbreak of COVID-19. As the economy began to emerge from lockdown after the horrendous second quarter of 2020, a cyclical trend began to emerge, and we’ve slowly been warming up to value stocks as a result.

 

In particular, we upgraded our view of the fin

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