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Treasury Yield Forecast Changes | Daily Market Update

Raising Economic And Market Forecasts...Again

On the LPL Market Signals podcast, Equity Strategist Jeff Buchbinder and Asset Allocation Strategist Barry Gilbert update forecasts based on how the economy’s recovery from the pandemic, aided by vaccine distribution, massive stimulus, and the desire to return to normal, continues to surpass expectations.

Daily Insights

U.S. stocks open little changed after the S&P 500 Index reached another all-time high on Monday.

  • European markets are higher in midday trading with the United Kingdom outperforming.
  • Stoxx Europe 600 Index is on track to surpass pre-pandemic highs.
  • Mixed fortunes for Asian stocks overnight as Japan slips while Hong Kong surges.

Revisiting our Treasury Yield Forecast

  • We have increased, and narrowed, our year-end forecast for the 10-year Treasury yield to a range of 1.75% – 2.0%.
  • Stronger economic growth and inflation expectations, an increase in Treasury supply and eventual Fed tapering may cause yields to rise.
  • Yields may temporarily eclipse 2.0% as inflation readings pick up but much higher yields would likely be attractive to income investors.
  • For more on our decision to increase our Treasury Yield forecast see this week’s Weekly Market Commentary and today’s LPL Research blog, available at 12p.m. ET.

Policy in play, but it’s a slow moving process

  • The Senate parliamentarian gave further leeway on potentially passing additional bills under the reconciliation process, which only requires a simple majority in the Senate.
  • West Virginia Senator Joe Manchin, the most centrist Democrat in the Senate, said he could see the corporate tax rate at 25% but not 28%.
  • Higher corporate taxes in some form are likely coming, which could bring a 5-10% hit to corporate earnings in 2022.

Technical Update

Despite robust headline gains for U.S. equities on Monday, participation was meager with advancers outnumbering decliners on the New York Stock Exchange (NYSE) by less than 2:1. Consumer discretionary, communication services, and technology led, powering the Nasdaq Composite through recent resistance to its highest level in six weeks.

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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

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All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data are from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

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