Navigating The Markets

Compass Changes

• Downgraded large/small foreign views to negative from negative/neutral.

Investment Takeaways

• Our 2014 stock market return forecast remains for gains of 10-15%,despite having approached the low end of that target, supported by continued near-double-digit earnings gains in the second half.*
• Small cap underperformance may be overdone, though technical weakness and the aging of the business cycle suggest it is prudent to temper enthusiasm some.
• We have further downgraded our foreign equities view due to lackluster growth and structural impediments in Europe, despite bold actions from the European Central Bank (ECB).
• A lower than benchmark weighting to bonds may be appropriate, as the yield does not compensate investors for the interest rate risk.
• High-yield bonds have been more volatile, but good credit quality, low defaults, and better valuations should provide support.
• Our recent downgrade of foreign bonds reflected expensive valuations following strong year-to-date performance, and the decline in yields is now extreme by historical comparison.
• From a technical perspective, S&P 500 consolidation above support may potentially set up a move higher toward 2010.

View the full Portfolio Compass publication.

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

Past performance is no guarantee of future results.

Stock investing involves risk including loss of principal.

Preferred stock investing involves risk, which may include loss of principal.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.

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