Investors: 2026 Midyear Outlook

LPL Research's 2026 Midyear Outlook: Policy, Buildouts, and Bottlenecks, examines the forces shaping markets and what they mean for investors through the rest of the year.

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NEW THEMES, RISING SIGNIFICANCE

Markets Held.
The Real Test Is Ahead.

Markets have faced meaningful tests in 2026 — new Federal Reserve leadership, rising energy prices, and a surge in AI-driven investment. Through it all, stocks have advanced and economic growth has continued.

A set of powerful forces stands to shape the direction of markets in the second half of 2026. While each carries its own set of risks and opportunities, together they form a backdrop that calls for thoughtful positioning and a clear view of where disruption and potential may intersect.

Key Themes to Watch: Four Forces Shaping the Second Half

U.S. Midterm Elections: Midterm elections may bring a divided government, increasing volatility and influencing key sectors like energy and healthcare.
AI Moves from Building to Proving Returns: AI investment remains strong, but focus is shifting toward proven profitability and real returns within the technology sector.
Resource Nationalism on the Rise: Governments are tightening control over resources, driving supply constraints and supporting higher energy and materials prices.
A New Era at the Federal Reserve: A more hands-off Fed approach may raise uncertainty, with limited rate cuts expected in the near term.

Midyear Outlook Highlights

Policy remains the dominant driver in markets and is complemented by the AI narrative which continues to evolve and strengthen corporate earnings. How the conflict in Iran resolves, and how quickly, will influence LPL Research's current and future perspectives.

Economy

Expect growth to moderate but remain positive as strong business investment offsets weakness in housing and rate-sensitive sectors.

Bonds

Sticky inflation and resilient growth are likely to keep the Federal Reserve (Fed) on pause, leaving Treasury yields range-bound.

Stocks

An improving but still challenging macro backdrop and artificial intelligence (AI)-driven earnings strength are expected to continue being the key pillars of support.

Commodities

The trend toward resource nationalism should broadly support key commodities.

Alternative Investments

Dispersion and structural change reinforce how alternatives can enhance portfolio flexibility, diversification, and return potential.

Currencies

The dollar remains range-bound but supported by U.S. economic resilience, AI-led equity gains, and more.

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"With uncertainty expected to persist, we believe tactical portfolios should seek to carefully balance risk mitigation with proactive positioning for new opportunities."

Marc Zabicki

Chief Investment Officer, LPL Financial

Action Steps to Consider

Stay Invested & Diversified

Maintain long-term stock and bond allocations while avoiding over concentration in technology. Balance exposure between AI leaders and sectors benefiting from broader market rotation.

Focus on Income & Stability

Prioritize bond income in a higher-rate environment. Favor short- to intermediate-term bonds and consider Treasury Inflation-Protected Securities (TIPS) to help manage unexpected inflation.

Turn Volatility into Opportunity

Expect election-driven market swings. Use pullbacks to add selectively and consider alternatives and real assets to strengthen portfolio resilience.

Market and Economic Education: Understanding Key Drivers

Financial headlines move fast and market commentary can feel overwhelming. That’s why we’ve designed resources to help individual investors and families better understand what’s happening in the stock market, why it’s happening, and what matters over time.

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Investor Weekly Market Updates

Markets move quickly, and it’s not always easy to understand what’s really driving the headlines. LPL Financial’s Investor Weekly Market Updates help cut through the noise with timely insights that explain what’s happening in the markets and why it matters.

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Look Back at 2026
Investor Outlook

As the year unfolds, new developments can shift the outlook in meaningful ways. That’s why the LPL Research Outlook serves as a practical check-in, highlighting what’s changed, what still holds, and what it could mean for you.

Look Back at Investor Outlook

Disclosure

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.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Asset allocation does not ensure a profit or protect against a loss.

All index data from FactSet.

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

This research material has been prepared by LPL Financial LLC.

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

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