March Market Madness: LPL’s Kleintop on 16 Stock Drivers

The NCAA basketball tournament starts Tuesday, which gives Jeffrey Kleintop, chief market strategist for LPL Financial (LPLA), a good reason to outline the “sweet sixteen” factors he sees driving today’s stock markets.

The third month of the year can be a downer, Kleintop says in a report issued Tuesday.

“In three of the past four years, the S&P 500 raced higher in March only to reverse all of those gains in a pullback of about 10% that began in late March or April,” the expert said. “It later took stocks at least five months to climb back to the peaks of March.”

Kleintop says the four brackets, or regions, of market-moving factors concern the economy, policy, fundamentals and sentiment.

When it comes to the U.S. economy, there is debate over growth and whether or not it’s being stunted by extreme winter weather. Data set to be released in the next few weeks will show if there has been a “genuine softening” of economic activity or not.

As for the global economy, Kleintop points to shifts in China, as well as in Germany and Japan. Could weakness in one of these large powers be overshadowed by growth in the other nations? Global policy issues today concern tensions in Ukraine, of course, as well as in the developing economies. In past years, conflicts overseas “did not keep stocks from moving on once the prospects for a broader military engagement faded,” he says.

However, if unrest prompts further Russian action, the risk of a broader crisis “rises.”

Tapering has prompted some emerging markets to devalue their currencies and trim spending. “These consequences of tapering have created weakness in emerging markets that has spilled over into developed economy stock markets,” Kleintop said.

Other Factors