Midyear Outlook 2026: What to Watch the Rest of the Year

In the Midyear Outlook 2026, LPL Research believes we may see a steady economy, continued AI-driven growth, and opportunities in stocks and bonds. Here's what investors should watch for during the second half of the year.

Last Edited by: LPL Research

Last Updated: July 09, 2026

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IN THIS ARTICLE:

The first half of 2026 gave investors plenty to think about. Markets navigated global conflicts, ongoing excitement around artificial intelligence (AI), strong company earnings, and a new Federal Reserve (Fed) chair. Despite those challenges, the U.S. economy has remained steady, and markets have continued to make progress.

As we move into the second half of the year, investors may need to get comfortable with some bumps along the way. According to LPL Research, midterm elections, the resource nationalism theme, a maturing AI investment cycle, and leadership changes at the Fed are likely to be key themes shaping markets through year-end.

Economic Growth Is Slowing, But Not Stopping

One of the biggest questions investors have is whether the economy can keep moving forward. LPL Research expects growth to continue, although at a slower pace than earlier in the year. Businesses are still investing and spending, which is helping support the economy even as areas like housing remain under pressure from higher interest rates.

The job market may cool somewhat, but unemployment is still expected to stay historically low. That is important because people who are working tend to keep spending, which helps support economic activity.

Inflation remains a factor to watch, especially if geopolitical events further disrupt energy prices or supply chains. However, inflation pressures should lose near-term pressure if global tensions improve, just as demand and labor market conditions become less inflationary.

Stocks Still Have Support, Yields to Remain Rangebound

LPL Research expects stocks to move higher over the second half of the year, though gains may be more modest than what investors have become used to recently. Strong corporate earnings remain one of the market's biggest strengths.

AI also continues to play an important role, but companies showing progress toward monetization will be a key factor. Investors are increasingly looking beyond the companies building AI technology and focusing on businesses that can use it to improve productivity, reduce costs, or grow profits. That shift could create new opportunities across a wider range of industries.

At the same time, markets may experience periods of volatility. Elections, potential policy changes, global conflicts, and questions about future AI profits could all create short-term uncertainty. For investors, staying diversified remains important.

In fixed income markets, bond yields may remain within a relatively stable range for the rest of the year. Higher inflation and resilient economic growth could keep the Fed from cutting interest rates aggressively in the near term.

In this environment, bond returns are likely to come primarily from the income they generate rather than significant price appreciation. For long-term investors, bonds can still provide portfolio stability and a source of regular income.

Four Key Themes to Watch

LPL Research highlights four major themes that could influence markets over the coming months:

  • U.S. midterm elections and potential policy changes
  • Growing demand for important resources and commodities
  • The next phase of AI adoption and its impact on company profits
  • New leadership at the Fed and future interest-rate decisions

These trends may create both opportunities and risks, making it important for investors to stay informed and maintain a long-term perspective.


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ECONOMIC GROWTH AND STOCK SUPPORT FAQs

Is a recession expected this year?

At this point, LPL Research does not expect a recession in 2026. Instead, we expect economic growth to slow from earlier levels while remaining positive. Business investment continues to support the economy, even as areas such as housing face challenges from higher interest rates. The job market is also expected to remain relatively healthy, which helps support consumer spending and overall economic activity. While growth may be uneven and some sectors may face more pressure than others, the current outlook points to slower expansion rather than a broad economic contraction. 

AI remains an important market theme because it continues to influence where companies invest and how they plan for future growth. Earlier in the AI cycle, much of the focus was on building the technology and infrastructure needed to support it.

Now, investors are increasingly paying attention to which companies can actually use AI to improve efficiency, reduce costs, increase productivity, or create new sources of revenue. This shift means potential opportunities may extend beyond technology companies and into a broader range of industries. Companies that can demonstrate measurable results from their AI investments may be better positioned for future earnings growth. 

Bonds can still play an important role in a diversified portfolio. Because interest rates remain relatively high, many bonds currently offer income levels that investors have not seen in years. Even if bond prices do not move significantly higher, investors can still benefit from the regular interest payments bonds provide. In addition, bonds can help reduce overall portfolio volatility when stock markets experience periods of uncertainty. For investors looking to balance growth opportunities with portfolio stability, bonds remain a valuable tool in the current environment. 

Disclosures

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. ​

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. ​

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

All investing involves risk, including possible loss of principal. ​

US Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. ​

The Standard & Poor’s 500 Index (S&P500) 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.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio. ​

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio. ​

Precious metal investing involves greater fluctuation and potential for losses.

The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.​

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Indexes are unmanaged and cannot be invested in directly.

The MSCI US Broad Market Index captures broad U.S. equity coverage. The index includes 3,204 constituents across large, mid, small and micro capitalizations, about 99% of the U.S. equity universe. Indexes are unmanaged and cannot be invested in directly.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Private credit carries certain risks — illiquidity, opacity, borrower concentration, and bespoke structures — that distinguish it from corporate bonds and bank loans and complicate its evaluation and oversight.

All index data from FactSet or Bloomberg.

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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