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Outlook 2026: The Policy Engine
By LPL Financial Research

In 2025, we observed a market environment where fiscal and monetary policy decisions, rather than traditional business fundamentals, were the primary drivers of market direction. This shift means that policy influence and market momentum have become significantly more impactful in shaping market trends, often overshadowing underlying economic performance. This policy and momentum-driven market is expected to continue, bringing with it continued volatility and significant price fluctuations. Investors should prepare for these swings by remaining patient and avoiding impulsive reactions to short-term sentiment. The good news is that LPL Research believes policy could be a tailwind for markets. We believe monetary decision-makers will continue easing policy as economic conditions downshift and inflation remains contained. Corporate earnings may help, though there will be little room for error. Core bonds will quietly offer some value, which should be aided by a more dovish Federal Reserve. In this policy and momentum driven market, we strongly encourage investors to look at non-correlated alternative investments.

To learn more about the opportunities and challenges to be on the lookout for, read the 2026 Outlook today.

Link for distilled, jargon-free insights: go.lpl.com/investoroutlook
Link for full report, including deep analysis: go.lpl.com/outlook

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. The economic forecasts may not develop as predicted. Please read the full 2026 Outlook: The Policy Engine for additional description and disclosure. This research material has been prepared by LPL Financial LLC.

Tracking #831180 / LPLE #831182 (Exp. 12/26)

We started 2025 on a high note, although we acknowledged that “no market environment is ever permanent, and that change is always potentially around the corner.” Well change did come, and with it, volatility, perhaps in part because we assumed President Trump’s policies would simply mirror those of his prior term. The impact of policy direction has been central to market direction this year. Uncertainty around trade policy dominated the stock market’s path in the first half of the year and will continue to play a large role in the second half. In the second half of the year, LPL Research expects to see slower economic growth, a weakening job market, and a slight uptick in inflation as the delayed effects of trade policy begin to take their toll. This will make things more challenging for the Federal Reserve (Fed), whose job is to keep inflation in check and maintain maximum employment. With a full plate to balance, the federal funds rate (which affects interest rates) will likely remain higher for longer. To learn more about the opportunities and challenges to be on the lookout for through the end of this year, read the 2025 Midyear Outlook today.

Click here to view the Full Report.
Click here to download the Investor Summary.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. The economic forecasts may not develop as predicted. Please read the full 2025 Midyear Outlook: Pragmatic Optimism, Measured Expectations for additional description and disclosure. This research material has been prepared by LPL Financial LLC.

Tracking #762971 | LPLE #762973 (Exp. 07/26)

Outlook 2025: Pragmatic Optimism
By LPL Financial Research

Looking back, 2024 clearly echoed many of the themes from 2023. By and large, the economy continued to defy expectations and surprised once again. Stocks continued their strong performance, driven by powerful trends in artificial intelligence and technology. On the other hand, the bond market experienced another lackluster year amid policy ambiguity and uneasiness over rising debt levels.

As we look to 2025, we remain cautiously optimistic. We’re cautious because no market environment is ever permanent, yet optimistic since constructive long-term technology trends are in place. Plus, potential tax policy and deregulation efforts in 2025 could provide some tailwinds — particularly from an economic perspective. While growth asset returns are not expected to be as robust in 2025, the investment environment should prove to be favorable for investors.

For 2025, new policies will need to be digested, and relatively rich valuations may get tested. For the time being, this backdrop favors a constructive, but also a conservative and balanced approach, when it comes to tactical stock and bond allocations.

Link for full report, including deep analysis: go.lpl.com/outlook2025
Click here for the Executive Summary

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. The economic forecasts may not develop as predicted. Please read the full Outlook 2025: Pragmatic Optimism for additional description and disclosure. This research material has been prepared by LPL Financial LLC.

Tracking #658532 / LPLE #658543 (Exp. 12/25)