Please ensure Javascript is enabled for purposes of website accessibility

Global Portfolio Strategy | September 11, 2020

Stocks continued their positive momentum with strong gains in August, sending the S&P 500 Index to new record highs before volatility returned in early September. The economic recovery remained on track even as the threat of COVID-19 lingers, while massive stimulus and optimism surrounding vaccine prospects helped support the August rally. US Treasuries and investment-grade corporates experienced losses in August as the 10-year Treasury yield saw its largest advance since September 2019. Below investment-grade bonds continued their advance.


  • Upgraded small cap stocks from negative to neutral
  • Downgraded large cap stocks from positive to neutral


  • Our equities recommendation remains overweight. Although we continue to believe markets may be pricing in an overly optimistic economic recovery scenario and recent weakness may be the start of a bigger pullback, we continue to favor stocks over bonds in a low-rate environment and on prospects for an end to the pandemic within our investment time horizon of 6 to 12 months.
  • S&P 500 Index has exceeded our bull case year-end target of 3,450+ provided in our Midyear Outlook 2020, and stocks are expensive based on traditional valuation metrics, both reasons we see limited upside for stocks between now and year-end. However, over the next 12 to 24 months, we continue to expect stocks to beat bonds. Our base case year-end 2020 S&P 500 fair-value target of 3,250–3,300 is under review
  • We have upgraded our view of small cap stocks to neutral to reflect the early-stage bull market and improving relative performance compared with large cap stocks.
  • Despite significant outperformance during the pandemic and elevated valuations, we continue to believe growth stocks are better positioned for the economic recovery.
  • The relative strength of China’s economy, a weakening US dollar, and low valuations enhance the attractiveness of emerging market equities, which we continue to favor over equities in developed international markets.
  • Our fixed income view remains underweight. While Federal Reserve (Fed) policy and current economic uncertainty may limit the risk of yields moving substantially higher, a likely second-half economic recovery may continue to support riskier assets going out a full year.
  • We favor a blend of high-quality intermediate bonds with a modest underweight to US Treasuries and an emphasis on short-to-intermediate maturities with sector weightings tilted toward mortgage-backed securities (MBS).

Click here to download a PDF of this report.



This material has been prepared for informational purposes only, and is not intended as specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors and they do not take into account the particular needs, investment objectives, tax and financial condition of any specific person. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing. Any economic forecasts set forth may not develop as predicted and are subject to change.

Stock investing involves risk including loss of principal. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Value investments can perform differently from the market as a whole and can remain undervalued by the market for long periods of time. The prices of small and mid-cap stocks are generally more volatile than large cap stocks. Bonds are subject to market and interest rate risk if sold prior to maturity.

Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Corporate bonds are considered higher risk than government bonds. Municipal bonds are subject to availability and change in price. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply. If sold prior to maturity, capital gains tax could apply. U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bond yields are subject to change. Certain call or special redemption features may exist which could impact yield. Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

Credit Quality is one of the principal criteria for judging the investment quality of a bond or bond mutual fund. Credit ratings are published rankings based on detailed financial analyses by a credit bureau specifically as it relates the bond issue’s ability to meet debt obligations. The highest rating is AAA, and the lowest is D. Securities with credit ratings of BBB and above are considered investment grade. Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. It is expressed as a number of years.

Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, geopolitical events, and regulatory developments. The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings.

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

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.

For a list of descriptions of the indexes referenced in this publication, please visit our website at

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed | Not Bank/Credit Union Deposits or Obligations | May Lose Value

Tracking #1-05054284 (Exp. 09/21)