Jul 23, 2019

With a Fed rate cut coming, analysts expect stocks to keep rising

Dion Rabouin, author of Markets
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Data: LPL Research; Chart: Axios Visuals

The S&P 500's 19% year-to-date return this year is no reason to sell, especially in light of July's expected Fed rate cut, strategists from LPL Financial argue.

What they're saying: “Even though fundamentals may not justify the market going much above our 3,000 forecast on the S&P 500, with the Fed tailwind behind us, we’ll ride the wave for now,” LPL chief investment strategist John Lynch said in a note.

  • While the market has already reached LPL's 2019 year-end target, Lynch and senior market strategist Ryan Detrick say the old stock market adage “Don’t fight the Fed” has them expecting more gains, and history is on their side.

By the numbers: The last 5 times the Fed started cutting rates outside of recessions, the S&P rose an average of 11.1% over the next 6 months and 15.8% over the next year,

  • The only caveat would be if the country is in the midst of a recession, like in 2001 and 2007. That's unlikely, given economists' expectations for a reading of 1.3%–3.3% on Q2 GDP.

Go deeper: Investors are selling stocks, but the market keeps rising

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