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  • Why Oil Prices Matter Less — But Still Move Headline Inflation

    Why Oil Prices Matter Less — But Still Move Headline Inflation

    PRINTER FRIENDLY VERSION

    Lower oil “intensity” — less oil used per dollar of economic output — means energy shocks have a smaller impact on growth than in past decades. And from the supply side, the U.S. is now a net exporter of petroleum products. Because we produce more than we import, the economy is less affected by volatile oil prices than during the 1970s and ‘80s, for example.

    Despite less reliance on oil, higher oil prices will add pressure to inflation. If energy costs stay elevated, inflation could rise again, potentially delaying interest rate cuts from the Federal Reserve (Fed). Geopolitical uncertainty remains a risk. Conflicts in the Middle East could disrupt supply chains and increase price volatility in key commodities like oil.

    U.S. Less Exposed to Oil Shocks

    The latest data from the U.S. Energy Information Administration (EIA) shows that the U.S. has firmly established itself as a net exporter of total petroleum products, a shift that first occurred in 2020 and has continued for several years. In 2024 (the latest data from the EIA), U.S. petroleum exports averaged just under 11 million barrels per day, exceeding imports of about 8.4 million barrels per day, marking the fifth consecutive year in which the U.S. held net exporter status. This structural change reflects not only higher domestic production but also the growing role of refined petroleum products and liquids flowing to global markets. As the U.S. continues to expand its export footprint, it becomes less impacted by oil price shocks that have historically weighed on domestic economic performance. For a deeper dive, consult the March Economic Navigator.

    Globally, however, not all advanced economies share this strategic position. Japan, in particular, remains acutely exposed to international oil market volatility because it relies on imports to meet over 90% of its crude oil needs, with approximately 88% coming from the Middle East. This heavy dependence puts Japan in a vulnerable position as geopolitical tensions and supply disruptions drive price uncertainty. Oil prices converted to the weakening yen also compound the negative impacts on the Japanese economy. The yen is over 4.5% weaker against the dollar since mid-February. Among the Group of Seven (G7) economies, only Canada and the U.S. are net exporters of petroleum products, while Japan — along with Germany, France, Italy, and the U.K. — remains a net importer and is therefore more sensitive to global price spikes. In the current environment, the U.S. benefits from a partial buffer against oil shocks, while Japan must navigate heightened risk as global energy markets fluctuate.

    U.S. Became a Net Exporter of Petroleum Products in 2020

    Source: LPL Research, Energy Information Administration, 03/16/26
    Disclosures: Past performance is no guarantee of future results.

    Transportation Sector Is Dominant User of Oil

    Over the past several decades, the structure of U.S. oil demand has shifted dramatically, with the transportation sector emerging as the dominant consumer of petroleum. In the 1950s, transportation accounted for roughly 52% of total oil demand, but by 2024 its share had risen to 67%, reflecting the continued expansion of vehicle use, freight movement, air travel, and the broader mobility needs of a modern economy. Meanwhile, the roles of the residential and commercial sectors have steadily diminished. The residential sector saw its share of oil consumption fall sharply, from about 10% in the 1950s to just 3% in 2024, as households transitioned toward natural gas, electricity, and more efficient heating technologies. These shifts illustrate how oil consumption has become increasingly concentrated in transportation, while improved efficiency and fuel switching have greatly reduced oil use in other sectors. The changing composition of oil consumption may explain why investors have so far shrugged off the blockage at the Strait of Hormuz and the corresponding spike in oil prices.

    It may not be just complacency that has buoyed capital markets, but the reality of the domestic economy’s waning reliance on oil.

    $200 per Barrel?

    A recent article from the American Enterprise Institute detailed the decline in energy usage in the U.S. Despite the likelihood that energy expenditures will increase because of the war in Iran, “the price of a barrel of oil would need to increase to greater than $200 to approach a rate of expenditure consistent with the 5% of GDP of 1980.”1 We are far from that level of oil prices, and investors do not expect prices to reach this level, according to baseline forecasts. This country is much less reliant on foreign energy than it once was, which explains the belief that this oil shock on macroeconomic factors will be short-lived and should not significantly alter the path of growth and core inflation in the longer run if the magnitude and duration of the shock are contained. Federal Reserve research shows the massive spike in Brent crude following Russia’s invasion of Ukraine had minimal impact on growth and core inflation.2

    Transportation Sector Has Increased Share of Petroleum Consumption Over Time

    Source: LPL Research, Energy Information Administration, 03/16/26

    What Are the Risks to Forecasts?

    The most obvious risk to the macro outlook is war in the Middle East and the secondary effects spilling into global logistics, commodity prices, and overall supply chains. Two key factors shaping the outlook amid geopolitical tensions are the magnitude and duration of the shock. Commodity prices would have to stay elevated for at least several weeks for the outlook to materially change. And given the declining oil intensity metrics, oil prices would need to breach $140 per barrel.

    A more sustained risk to growth in 2026 is the warning signs we have from the job market. Job growth is weakening (demand side), and unemployment remains low (supply side). If labor supply was short, firms would have many more job openings, and push compensation higher, but that is currently not the case. We do expect job growth to deteriorate further. Average monthly gains in 2026 could hover around 50,000 per month. Inflation is another risk. We expect Personal Consumption Expenditures (PCE) inflation to print around 2.2% by December 2026, but the path to that rate will be long and bumpy, especially if Middle East conflicts impact supply chains. If energy prices remain elevated over the coming months, headline inflation may begin to reaccelerate, bringing the Fed to pause for the next several meetings. But as we slowly march toward 2.2% by the end of the year, the Fed will likely cut rates twice later this year.

    Trade Headwinds Are Still Lurking in the Background

    Headlines are focusing on the risk of war, but when the conflict simmers, the uncertain impacts from trade policy will come back into focus. Investors should remain vigilant, but at least the headwinds are softening.

    The reinstated 10% blanket reciprocal tariff under Section 122 of the Trade Act of 1974 marks a notable shift in trade policy, lowering the U.S. effective tariff rate (ETR) to 9.4% from the earlier 12.7% imposed through International Emergency Economic Powers Act (IEEPA) authorities. This reduction stems largely from the retention of prior carve outs, such as those for passenger vehicles, pharmaceuticals, United States-Mexico-Canada Agreement (USMCA) compliant goods, and select electronics, which continue to blunt the impact of tariffs. While the current authorization expires in 150 days without congressional action, the administration retains the ability to raise the levy to a maximum of 15%, a move that would lift the ETR to 11.3%.

    However, Section 122 does not permit tailor-made tariff adjustments by country, limiting the administration’s flexibility even as it increasingly uses tariffs as both a revenue tool and a policy instrument. The administration hopes to make these tariffs permanent using Section 301 which requires investigations of each trading partner and takes several months to complete.

    For major trading partners, the updated tariff structure generally results in lower or unchanged ETRs, with no country facing an increase as long as the blanket rate remains at 10%. China, previously subject to dual IEEPA-based tariffs, including a fentanyl-related levy, sees its ETR fall sharply to roughly 19% from 29% under the consolidated approach, though it still retains the highest ETR among large trading partners. Brazil experiences the largest reduction, with its ETR dropping 18 percentage points to 11%, while other significant partners such as Vietnam and Japan also remain among the more highly taxed exporters. Overall, 26 of the United States’ 31 largest trading partners, each with more than $14 billion in imports, benefit from lower effective rates under the new structure, underscoring how the switch from IEEPA to Section 122 redistributes tariff impacts without raising burdens on any country at the current rate.

    Tariffs Aren’t Going Away

    Source: LPL Research, Fitch Ratings, Census Bureau 03/16/26

    Asset Allocation Insights

    LPL’s Strategic Tactical Asset Allocation Committee (STAAC) maintains its tactical neutral stance on equities. As the war in Iran continues and oil prices have moved sharply higher, investors may be well served by bracing for additional volatility. The stock market’s resilient track record during geopolitical crises is reassuring, leaving STAAC to look for opportunities to potentially add equities at lower levels rather than remove equities due to what will likely be short-term market disruption. Technically, the broad market’s long-term uptrend remains intact.

    STAAC’s regional preferences across the U.S., developed international, and emerging markets (EM) are aligned with benchmarks. Attractive valuations in non-U.S. equities are offset by upward pressure in the U.S. dollar, although the Committee continues to watch EM closely for opportunities due to improvements in fundamentals and the technical analysis picture pre-Iran conflict.

    The Committee still maintains a slight preference for growth over value tilt and large caps over small caps. In terms of domestic sectors, communication services remains an overweight, while industrials were recently upgraded to overweight based on strong earnings momentum, technical trends, and tailwinds from fiscal spending and AI-driven investment. The Committee continues to debate other upgrade candidates, including healthcare and technology.

    Within fixed income, the STAAC holds a neutral weight in core bonds, with a slight preference for mortgage-backed securities (MBS) over investment-grade corporates. The Committee believes the risk-reward for core bond sectors (U.S. Treasury, agency MBS, investment-grade corporates) is more attractive than plus sectors. The Committee does not believe adding duration (interest rate sensitivity) at current levels is attractive and remains neutral relative to benchmarks.

    1. https://www.aei.org/articles/the-shrinking-economic-weight-of-energy-2/

    2. The Fed – Oil Price Shocks and Inflation in a DSGE Model of the Global Economy

    Jeffrey J. Roach, Chief Economist, LPL Financial

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    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.

    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

    RES-006767-0226 | For Public Use | Tracking #1078433  (Exp. 03/2027)

  • Weekly Market Performance — March 13, 2026

    Weekly Market Performance — March 13, 2026

    LPL Research’s Latest Blog Posts
    Last Updated: March 13, 2026

    LPL Research provides its Weekly Market Performance for the week of March 9, 2026. Capital markets remained volatile for another week as geopolitical turmoil in the Middle East and rising oil prices continued to pressure global sentiment, yet U.S. equities remained relatively resilient with somewhat measured declines. Energy stocks again led the S&P 500, while semiconductors provided key support amid strong earnings takeaways. International markets were mostly lower, with Europe weighed down by stagflation concerns and Asia dented by rising oil prices and credit market jitters. Meanwhile, bond markets saw yields rise and curves flatten as investors pushed out rate‑cut expectations, and crude oil moved higher amid supply disruptions.

    Stock Index Performance

    Index Week-Ending One Month Year to Date
    S&P 500 -1.28% -2.67% -2.80%
    Dow Jones Industrial -1.77% -5.74% -2.92%
    Nasdaq Composite -1.13% -1.83% -4.76%
    Russell 2000 -1.75% -6.25% -0.03%
    MSCI EAFE -1.66% -7.28% 0.65%
    MSCI EM -0.52% -6.71% 4.22%

    S&P 500 Index Sectors

    Sector Week-Ending One Month Year to Date
    Materials -1.38% -7.60% 7.71%
    Utilities 0.85% 1.04% 9.86%
    Industrials -2.89% -5.38% 6.22%
    Consumer Staples -0.16% -4.73% 10.11%
    Real Estate -1.12% -2.71% 5.44%
    Health Care -1.52% -4.63% -3.05%
    Financials -3.11% -5.24% -10.86%
    Consumer Discretionary -2.86% -3.08% -7.92%
    Information Technology -0.61% -1.65% -6.52%
    Communication Services -1.30% -0.62% -3.09%
    Energy 2.47% 6.09% 28.71%

    Fixed Income and Commodities

    Indexes and Commodities Week-Ending One Month Year to Date
    Bloomberg U.S. Aggregate -0.79% -1.29% -0.03%
    Bloomberg Credit -1.20% -1.91% -0.69%
    Bloomberg Munis -0.69% -0.91% 0.71%
    Bloomberg High Yield -0.39% -0.86% -0.13%
    Oil 7.18% 54.92% 69.68%
    Natural Gas -1.63% -3.36% -14.98%
    Gold -2.50% 0.00% 16.74%
    Silver -4.28% 4.53% 12.92%

    Source: LPL Research, Bloomberg 3/13/26 @3:10 p.m. ET
    Disclosures: Indexes are unmanaged and cannot be invested in directly.

    U.S. and International Equities

    U.S. Equities: Much like last week, geopolitical developments out of the Middle East and the direction of crude oil prices guided market sentiment in volatile trading. Nonetheless, also similar to last week, U.S. equities continued to hang tough with the Nasdaq and S&P 500 both trading just over 1% lower. Tanker traffic in the Strait of Hormuz remained effectively halted, forcing producers in the Persian Gulf to shut or reduce production — exacerbated by Iranian attacks on regional targets in the latter half of the week. Worries of a global energy supply crunch drove oil prices and Treasury yields higher. Inflation worries pushed out rate cut bets — acting as a headwind for stocks — with releases of emergency reserves doing little to sway investor sentiment. Dovish-leaning remarks on the conflict from inside the Beltway early this week cushioned returns after President Trump stated that the U.S. campaign was ahead of schedule relative to its initial four- to five-week timeframe, although no immediate off-ramp has been presented yet. In-line inflation data and better-than-expected personal spending data briefly lifted risk sentiment Friday, before stocks slipped back below the flatline as investors digested a sluggish revision to fourth quarter economic growth and reports of additional U.S. military assets and personnel shipping off to the Middle East.

    Energy stocks led the S&P 500 again this week, while technology provided notable under-the-radar support. Semiconductor shares were second only to energy among sub-industry groups thanks to well-received earnings from Oracle (ORCL) with artificial intelligence (AI) overspending and cash flow angst partially defused after executives stated some cloud customers will prepay for chips or supply their own.

    International Equities: The pan-European STOXX 600 Index ended moderately lower on the week. Stagflation concerns remained center stage as inflation and economic growth jitters collided. The combination could constrain the European Central Bank (ECB) and Bank of England from easing, a dynamic underlined by ECB Governing Council member Peter Kazimir, who stated that rate hikes may be closer than initially thought. Nonetheless, the energy-sensitive region hugged the flatline with some support from the emergency oil release. Simultaneously, banking shares were a drag after Deutsche Bank flagged a $30 billion exposure to private credit amid ongoing nervousness around the space.

    Meanwhile, Asian equities ended mostly lower as the effect of higher oil prices rippled across the globe. However, within regional developments, Japan was weighed down by banking shares as rate hike hopes for this summer were offset by credit concerns from the U.S. spilling across the Pacific. Japanese markets also drew attention to end the week amid rising yields and a weaker yen. South Korea continued to face outsized swings in both directions as chipmaking and AI-related shares remained volatile, while Taiwan was a relative outperformer with just a modest loss. Mainland China led the region with a slight gain, padded by Tuesday’s rally on Tencent’s new AI agent launch. Australia was also among underperformers as inflation expectations hit their highest level since 2023.

    Fixed Income, Currency, and Commodity Markets

    Fixed Income: Core bonds, measured by the Bloomberg Aggregate Index, traded lower over the last five days.

    Since the start of the Iran conflict, Treasury yields are higher across the yield curve by roughly 30 basis points. The yield curve has also flattened, with the 10‑year and 2‑year spread near its flattest level since last December. Selling pressure at the front end of the curve has pushed out rate-cut expectations, with markets fully pricing in the next cut in 2027. The bond market sell-off has been global, with markets seemingly expecting a new rate-hiking campaign by the European Central Bank (nearly two hikes) and the Bank of England (almost one full hike) this year. Fundamentally, Treasury yields represent the expected fed funds rate over the life of the security, plus a term premia. So, the sell-off in the front end of the U.S. Treasury curve is likely limited as it’s unlikely the Fed will reverse course and start to hike rates later this year. It’s more likely that the Fed would delay cuts into next year or when there is further clarity from the Iran conflict. So, if markets fully price out rate cuts this year, the 2-year yield in particular will be limited with how much higher its yield could go. Longer maturities, however, may drift higher due to rising term premia and less‑certain policy expectations further out.

    Commodities and Currencies: The broader commodities complex traded higher this week after oscillating around the unchanged point. Crude oil remained the focal point not just within commodities but across capital markets, with both West Texas Intermediate (WTI) and Brent futures trading higher over the second week of the conflict in the Middle East. Tanker flows through the Strait of Hormuz remained halted and jitters of a supply squeeze kept upward pressure on prices despite an emergency release of 400 million barrels and U.S. plans for protection and insurance. However, these bright spots were overshadowed by worries of how much of the release can get to the market in time and the two-week delay in U.S. action, respectively, and the fact that producers have slashed or stopped production as a result of the blockade filling storage facilities and Iranian strikes around the region. Elsewhere, gold traded lower on waning rate cut expectations and a stronger U.S. dollar, which strengthened as investors continued to favor the greenback as a safe haven in their search for liquidity amid few signs of an offramp for the conflict. The euro, yen, and pound all weakened.

    Economic Weekly Roundup

    The Fed has a dilemma. Annual core inflation accelerated to 3.1% in January from 3.0% the previous month. We expect further acceleration in next month’s release.

    • The Fed’s preferred inflation metric, Personal Consumption Expenditures, shows the economy is still battling inflation at the start of the new year. And a major downward revision to 0.7% for Q4 growth complicates things for policymakers.
    • Headline inflation rose 0.3% from the previous month. Investors need to see monthly prints stay consistently in the range of 0.1% and 0.2% before they can realistically believe inflation risks are mostly contained.
    • Core services ex housing (supercore) inflation accelerated to 3.5%, the fastest pace since February 2025 and driven by health care and financial services. These categories should show signs of letting up later this year.

    Bottom Line: Underlying inflation pressures will continue to boil under the surface and next month’s print will also be elevated, impacted by the war in the Middle East. We expect the Fed to highlight the uncertainty on both sides of the mandate. Inflation will be impacted by the war and unemployment will be impacted by the disruptions in the labor market. Expect to see some important revisions in the upcoming Summary of Economic Projections next week.

    The Week Ahead

    The following economic data is slated for the week ahead:

    • Monday: Empire Manufacturing (Mar), Industrial Production (Feb), Manufacturing (SIC) Production (Feb), Capacity Utilization (Feb), NAHB Housing Market Index (Mar)
    • Tuesday: ADP Weekly Employment Change (Feb 28), New York Fed Services Business Activity (Mar), Leading Index (Feb), Pending Home Sales (Feb), Bloomberg U.S. Economic Survey (Mar)
    • Wednesday: MBA Mortgage Applications (Mar 13), Headline and Core PPI (Feb), Factory Orders (Jan), Durable Goods Orders (Jan final), Capital Goods Orders and Shipments (Jan final), FOMC Rate Decision (Mar 18), Total Net TIC Flows (Jan), Net Long-term TIC Flows (Jan)
    • Thursday: Initial Jobless Claims (Mar 14), Continuing Claims (Mar 7), Philadelphia Fed Business Outlook (Mar), New Home Sales (Jan), Wholesale Inventories (Jan final), Wholesale Trade Sales (Jan), Household Change in Net Worth (4Q), Building Permits (Jan final)
    • Friday: No economic releases scheduled

    Important 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. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

    Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

    Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

    This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

    Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. 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.

    Asset Class Disclosures –

    International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

    Bonds are subject to market and interest rate risk if sold prior to maturity.

    Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

    Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.

    Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

    Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

    High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

    Precious metal investing involves greater fluctuation and potential for losses.

    The fast price swings of commodities will result in significant volatility in an investor’s holdings.

    This research material has been prepared by LPL Financial LLC.

    Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value

    For Public Use – Tracking: #1078431

  • Oil in the Driver’s Seat as Geopolitical Tensions Rise

    Oil in the Driver’s Seat as Geopolitical Tensions Rise

    Adam Turnquist | Chief Technical Strategist
    Last Updated: March 12, 2026

    The market has shifted quickly from concerns about artificial intelligence (AI) disruption to rising geopolitical risks tied to the conflict in Iran. Headlines continue to drive market movements as investors wait for greater clarity on the timing of a U.S. exit strategy. For now, oil remains the primary market driver, with developments around the reopening of the Strait of Hormuz acting as either an accelerator or a brake on risk appetite. In our view, easing Iran tensions and the restoration of global oil supply will be essential catalysts for equity markets to advance.

    Despite the building uncertainty, equity markets are holding up relatively well. As of March 10, the S&P 500 was trading about 3% below its record high. Earlier this week, bulls made a strong showing by reversing a sizable intraday decline and pushed the index back above support near 6,775, which represents the lower end of a multi-month trading range. That level is being tested again today, and it will be important for buyers to defend it. The technology sector has also shown renewed signs of resilience and successfully withstood another retest of its closely watched 200-day moving average (dma).

    Bulls Face Another Big Test

     

    Source: LPL Research, Bloomberg 03/11/26
    Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

    Peak Fear?

    Signs are beginning to appear that investor fear may be peaking. The CBOE Volatility Index (VIX) climbed as high as 35.30 on Monday morning as demand for downside protection spiked. Historically, intraday VIX readings above 30 have often coincided with market inflection points and have been followed by above‑average S&P 500 returns over the subsequent 12 months. Although the fear gauge remains elevated, it has retreated back below support near 29, with the VIX futures curve also becoming less inverted and moving closer to its typical upward‑sloping structure.

    The Fear Gauge Remains Elevated, but Has Backed Off the Initial Highs

     

    Source: LPL Research, Bloomberg 03/11/26
    Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Any futures referenced are being presented as a proxy, not as a recommendation.

    Oil in the Driver’s Seat

    Oil markets continue to offer real‑time insight into expectations for how the conflict with Iran may unfold. West Texas Intermediate (WTI) crude spiked to nearly $120 per barrel when futures opened on March 8, following reports that Israel had struck Iranian oil facilities and several Middle Eastern producers announced production cuts tied to the effective shutdown of the Strait of Hormuz. Prices have since pulled back as investors reassess how much additional risk premium can reasonably be priced in, particularly given President Trump’s stated goal of ending the war within weeks rather than months and his commitment to keeping the Strait open to tanker traffic.

    From a technical standpoint, WTI is retesting resistance near $88 after breaking below its 2024 high of $95. Additional support sits in the $78 to $80 range, and a move below this area would be viewed as a constructive signal for both a potentially better‑than‑feared resolution with Iran and for broader market sentiment. Although crude has eased from Sunday night’s highs, implied volatility remains elevated. The CBOE Crude Oil Volatility Index (OVX), often described as the oil market’s version of the VIX, has surged to 121, its highest level since the start of the COVID‑19 pandemic. The divergence between the pullback in oil prices and persistently high implied volatility underscores the significant uncertainty surrounding the duration and intensity of the conflict and suggests the oil market is likely to remain extremely choppy, with further upside risk if geopolitical tensions escalate.

    Oil Prices Fade, But Remain Uncomfortably High

     

    Source: LPL Research, Bloomberg 03/11/26
    Disclosure: Past performance is no guarantee of future results. Any futures referenced are being presented as a proxy, not as a recommendation.

    History as a Guide

    While the latest moves in the oil market have been surprising, they are not unprecedented. Brent crude, the global oil benchmark, is tracing a pattern that closely resembles its price behavior around the time of Russia’s invasion of Ukraine.

    In late 2021, Russia began amassing military assets along the Ukrainian border, prompting President Joe Biden to warn that the United States and its allies would respond with strong economic measures in the event of further escalation. Despite these warnings, Russia continued to build its troop presence and conduct military exercises into early 2022 before officially invading Ukraine on February 24, 2022.

    Although the motivations and timelines differ, the recent escalation in the Middle East has followed a similar path of rising geopolitical tension. The buildup has included increased U.S. military presence, pressure on Iran to reach a nuclear agreement, and the ultimate U.S.–Israeli strike on Tehran.

    Within this backdrop, Brent crude has behaved in a familiar way. In early 2022, the threat of conflict pushed oil prices from roughly $65 in early December to a closing high of $128 as the war unfolded, before easing as supply concerns moderated. The historical pattern also shows that oil does not immediately relinquish its war‑related risk premium, with Brent remaining highly volatile for months after the Ukraine invasion before eventually moving lower.

    A similar dynamic is unfolding today. Escalating tensions with Iran pushed Brent from about $60 in early December to nearly $120 on March 9. Prices have since retreated as reports of some tanker traffic moving through the Strait of Hormuz emerged (reportedly nearly 12 million barrels originating from Iran since the war began) and President Trump suggested the conflict could be nearing a resolution. The administration also warned of severe retaliation should Iran attempt to block the Strait. In addition, the International Energy Agency recently proposed an unprecedented release of strategic oil reserves to help counter elevated prices, echoing its response during the Ukraine conflict.

    While the 2022 comparison may indicate that peak prices for the current geopolitical conflict may already be behind us, it is important to recognize that the Strait of Hormuz introduces a fundamentally different level of supply risk in the case of Iran.

    Brent Crude Comparison to Russia’s Invasion of Ukraine

     

    Source: LPL Research, Bloomberg 03/11/26
    Disclosures: Past performance is no guarantee of future results. Any futures referenced are being presented as a proxy, not as a recommendation.

    Conclusion

    Markets have shifted their focus from AI-related concerns to the war in Iran. Oil remains the key driver of investor sentiment, with the reopening of the Strait of Hormuz determining risk appetite. Despite a high degree of uncertainty over what happens next, equity markets have held up relatively well, with the S&P 500 trading only modestly below its recent record high.

    Volatility has spiked, but early signs suggest fear may be peaking. Oil markets are expected to remain highly volatile as investors assess the likelihood of a prolonged supply disruption. Current price patterns closely mirror the behavior seen during the Russia–Ukraine conflict in 2022, though the Strait of Hormuz presents a more acute supply risk.

    Important 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. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

    Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

    Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

    This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

    Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. 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.

    Asset Class Disclosures –

    International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

    Bonds are subject to market and interest rate risk if sold prior to maturity.

    Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

    Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.

    Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

    Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

    High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

    Precious metal investing involves greater fluctuation and potential for losses.

    The fast price swings of commodities will result in significant volatility in an investor’s holdings.

    This research material has been prepared by LPL Financial LLC.

    Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value

    For Public Use – Tracking: #1078023

  • Treasury Market: Stuck Between Iran and a SaaS Space

    Treasury Market: Stuck Between Iran and a SaaS Space

    Lawrence Gillum | Chief Fixed Income Strategist
    Last Updated: March 10, 2026

    The Treasury market is stuck between artificial intelligence (AI)-driven job displacement and the ongoing conflict in Iran. Earlier in the year, Treasury yields fell sharply as investors weighed the possibility that accelerated AI adoption could slow economic growth by displacing labor. As we noted in our recent Rate and Credit View: When AI Disruption Meets Leveraged Balance Sheets: Credit Market Risks in the Software Sector, AI is rapidly reshaping credit risks across the software as a service (SaaS) sector, shifting market attention from the demand benefits enjoyed by hyperscalers to the challenges facing highly leveraged enterprise software companies. Lower‑rated and private borrowers are most exposed as disruption compresses timelines for refinancing and heightens the risk of impaired business models. Tech sector spreads have already widened, and the software‑heavy leveraged loan market faces elevated concentration risk, weak credit quality, and an earlier‑than‑average maturity wall, with nearly half of software loans maturing within four years. Collateralized loan obligations (CLOs), major holders of these loans, are experiencing pressure from declining software loan prices, though structural protections continue to support senior tranches.

    Investment‑grade issuers are more insulated thanks to stronger balance sheets and easier capital‑market access, but rising AI‑driven capital expenditures (Capex) needs and record issuance — especially from large tech firms — are adding supply pressure to spreads. Meanwhile, private credit represents the deepest structural risk because valuations adjust slowly, masking emerging stress. Software‑focused business development companies (BDCs) have begun experiencing heavy redemption requests, and private credit default rates are expected to rise. While those concerns remain part of the macro backdrop, they have recently been overshadowed by a sharp rise in inflation expectations — effectively erasing the earlier yield decline.

    The Iran Conflict

    Since the start of the Iran conflict, Treasury yields reversed sharply as investors began fearing the impact of rising energy prices on inflation. U.S. oil prices surged past $100 per barrel, and the 10-year yield pushed back above 4.15% on expectations of hotter inflation. The AI safety trade was overwhelmed by the inflation trade almost overnight and has since reversed most of the earlier fall in yields.

    Geopolitical tensions in Iran continue to keep upward pressure on oil prices. The rise in energy costs is pushing near‑term inflation expectations higher, with the 2‑year Treasury Inflation-Protected Securities (TIPS) breakeven above 3% for the first time since last April and the 5-year TIPS breakeven rising sharply as well. TIPS breakevens, which represent the difference between nominal Treasury yields and TIPS yields, reflect the market’s estimate of inflation over the stated horizon. This growing inflation premium pushed the 2‑year Treasury yield to its highest level since last November as Federal Reserve (Fed) rate-cut expectations continue to get priced out.

    Market-Implied Inflation Expectations Have Shifted Higher

     

    Source: LPL Research, Bloomberg 03/09/26
    Disclosures: Past performance is no guarantee of future results.

    Investor expectations for Fed rate cuts have shifted meaningfully over the past several weeks as well. Markets are now pricing in only a 50% probability of a second rate cut this year, a sharp decline from expectations of three cuts as recently as late February. The move reflects rising inflation concerns rather than any perceived improvement in economic growth.

    The shift extends beyond U.S. borders: higher inflation expectations are pressuring global bond yields as well. Markets have now priced in a full rate hike from the European Central Bank in 2026 with over a 60% chance of a second hike later this year, further reflecting diminished global easing expectations.

    Despite rising inflation fears, the Fed is sending signals that markets may be over‑adjusting. Fed Governor Chris Waller commented last Friday that if the current oil‑driven inflation shock proves temporary, the Fed would likely look through the recent rise in prices. That message suggests policy makers may not be as quick to scale back rate‑cut plans as the market currently implies — depending on the depth and duration of the Iran conflict, of course.

    Bottom Line: Taken together, the combination of rising inflation expectations and ongoing AI‑related growth uncertainty argues for continued caution in interest‑rate exposure. For now, we remain neutral duration relative to benchmarks, waiting for more attractive entry points. We would look for the 10‑year Treasury yield to reach the 4.50–4.75% range before reconsidering duration positioning. And ongoing uncertainty around the ultimate impact of AI on corporate credit markets continues to support a broadly cautious stance.

    Important 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. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

    Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

    Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

    This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

    Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. 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.

    Asset Class Disclosures –

    International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

    Bonds are subject to market and interest rate risk if sold prior to maturity.

    Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

    Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.

    Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

    Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

    High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

    Precious metal investing involves greater fluctuation and potential for losses.

    The fast price swings of commodities will result in significant volatility in an investor’s holdings.

    This research material has been prepared by LPL Financial LLC.

    Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value

    For Public Use – Tracking: #1076420

  • Navigating Market Volatility During the Iran Crisis

    Navigating Market Volatility During the Iran Crisis

    Last Edited by: LPL Research

    Last Updated: March 09, 2026

    PRINTER FRIENDLY VERSION

    In our 2026 Outlook: The Policy Engine, we listed several risks to stocks that could prevent the S&P 500 from achieving our forecast for high-single-digit returns in 2026 (to a fair value target range of 7,300–7,400). One was narrow stock market leadership. Well, as mega cap technology leadership faded in recent months, the cyclicals and defensives picked up the slack. The traditional market-cap-weighted S&P 500 Index is down 1.5% year to date as of March 6, 2026, but the average stock in the index is up 3.2%.

    Another risk we cited was a potential artificial intelligence (AI) bubble. Although scrutiny on AI and fears of business model disruption have increased, we wouldn’t call AI a bubble with NVIDIA (NVDA) shares trading at a price-to-earnings ratio (P/E) of 21.6 based on the consensus earnings estimate over the next four quarters (by no means is this a recommendation, but NVDA grew revenue more than 70% and nearly doubled its net income last quarter). Rising interest rates and midterm elections, both largely non-factors so far, were also on our 2026 risk list.

    What about geopolitical risk? Yes, it was there, too. Last week reminded us why geopolitical threats should always be on lists of risks from Wall Street strategists. It’s just a matter of time before it comes around again. Our key message for investors dealing with these unnerving headlines and market volatility is simple. Be patient. Stay diversified. Maintain balanced portfolios that include some investments well-positioned for volatility. Look for opportunities on the other side. Those who ride out the ups and downs, in time, will be grateful they did.

    Checking the Oil Under the Hood

    It’s difficult to separate the human and emotional side of war from the economic and market impacts. Without minimizing the human element, we focus on markets here. From that perspective, the energy market is the primary way through which this crisis will affect markets globally. Oil and natural gas production and transit have already been disrupted, sending prices sharply higher. If these disruptions are severe and long lasting, they have the potential to influence inflation expectations, weigh on business confidence, and elevate volatility across asset classes, all of which will likely translate into lower stock prices. Simply put, the more intense and prolonged the geopolitical shock, the larger the likely market impact.

    The center of this crisis lies in the Strait of Hormuz, a vital waterway that carries 20% of the world’s oil supply. Oil and liquified natural gas (LNG) traffic through the strait is at a standstill, but at this point we don’t have any reason to expect the logjam to continue for more than a few weeks. That should hopefully give the Trump administration and allies in the Persian Gulf region enough time to eliminate, or dramatically reduce Iran’s drone stockpile and missile launch capabilities, better defend against Iran’s drone attacks on oil tankers, and ensure the ships can pass through. For a persistent rise in crude prices to materialize, markets would likely need evidence of a more prolonged shutdown of the Strait. President Trump controls the timeline here, but in the fog of war, timelines can change.

    Bottom line: Watch the flow of oil and oil prices to gauge the effects of the conflict on economic growth and inflation. A meaningful escalation could potentially disrupt energy markets enough to push oil prices well over $100 a barrel and keep them there. A dozen countries have already been hit by Iranian strikes. This scenario remains unlikely in our view, especially in a midterm election year, but it’s possible. We’ve already seen the Trump administration grant India a 30-day waiver to import Russian oil to help alleviate some of the upward pressure on oil prices. More actions by the administration to contain oil prices are forthcoming.

    Oil Prices Surged, Strait of Hormuz Tanker Traffic at a Standstill

    Source:LPL Research, 03/05/26

    Disclosures: Past performance is no guarantee of future results. Any commodities, options, or futures referenced are being presented as a proxy, not as a recommendation.

    Stocks Have Historically Been Resilient During Geopolitical Crisis Events

    Periods of geopolitical conflict understandably cause nervousness among investors. This conflict has already widened beyond most in the Middle East in recent memory, as Iran retaliated by launching a wave of missiles at not just Israel but many of its neighbors in the Gulf, including Bahrain, Kuwait, Qatar, Saudi Arabia, and the UAE (targeting mostly U.S. military bases in the region). Some Gulf oil production facilities and oil tankers in the region have been damaged. Iraq, Kuwait, and the UAE have started cutting oil production. Shipping traffic through the Strait of Hormuz remains at a standstill. Concerns of a prolonged conflict with lasting disruption to energy markets have prompted the White House to promise naval escorts, insurance, and other measures to contain oil prices.

    While no one knows when or how this conflict will end — or what Iran will look like after it’s over — we know markets don’t like uncertainty. However, the stock market has demonstrated remarkable resilience in the face of major geopolitical shocks in the past. Our review of more than eight decades of market reactions to 26 different geopolitical events is reassuring (see “The S&P 500 and Geopolitical Events: Mostly Short, Shallow Pullbacks” chart).

    The S&P 500 has historically experienced pullbacks of only about 4.5% on average (median just 2.9%) after these geopolitical events, with markets typically stabilizing in less than a month. Markets tend to respond swiftly to uncertainty, but then they tend to regain their footing sooner than most investors expect. Stocks typically take the elevator down, and the escalator up in situations like this, but the ride typically doesn’t take long. The exception, as illustrated in the study, is when the U.S. economy enters recession, as in 1990 and 2001. That is not our expectation this time, although if oil prices exceed $100 per barrel and stay there for an extended period of time, recession odds would certainly increase.

    The S&P 500 and Geopolitical Events: Mostly Short, Shallow Pullbacks

    Source: LPL Research, CFRA, Strategas 03/05/26
    Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. The modern design of the S&P 500 index was first launched in 1957. Performance before then incorporates the performance of its predecessor index, the S&P 90.
    Chart data includes 26 events in total. Events not labeled include Hungarian uprising (’56); Suez crisis (’56); Kennedy Assassination (1963); Gulf of Tonkin Incident (’64); Six-Day War (’67); Munich Olympics (’72); Yom Kippur War (’73); Reagan shot (’81); Madrid bombing (’04); London Subway bombing (’05); Boston Marathon Bombing (’13); Syria Bombing (’17); North Korea Missile Crisis (’17); Saudi Aramco Drone Strike (’19); Iranian General killed in Airstrike (’20); U.S. Pulls Out of Afghanistan (’21); Israel-Hamas War (’23); U.S.-Israeli Airstrikes of Iran Nuclear Sites (’25).

    Consistent with history, stocks have been resilient so far, as the S&P 500 fell just 2% last week. There are several reasons for that, including: 1) the stock market’s well-known track record of shrugging off geopolitical events; 2) U.S. energy independence; 3) the expectation that the conflict will be relatively short-lived; and 4) the rebound in technology, notably software, after struggling with AI disruption fears over the prior two weeks. Chalk that up to good underlying fundamentals.

    While the situation in the Middle East remains fluid, and high oil prices are starting to weigh some on the economy, this energy shock is unlikely to lead to a recession. President Trump controls the timeline, and as the economic and human costs of the conflict rise, the political incentives to halt the attacks will get stronger. The path of oil prices, the duration of the conflict, and the nature and effectiveness of retaliatory actions could contribute to continued market volatility.

    The global economy is unlikely to be derailed. In the short-term, the U.S. markets offer a relatively safer port in the storm relative to Asian and European markets, which are more dependent on imported oil and gas.

    What Can We Learn About Volatility From the VIX

    The developing war in Iran has ushered in an additional layer of uncertainty for markets. Fear of a prolonged conflict in the Middle East and subsequent inflation shocks from surging oil prices have rattled investor sentiment. The CBOE Volatility Index, or more commonly referred to as the VIX, helps assess the level of fear priced into equity markets. This index represents implied 30-day volatility derived from the aggregate values of a weighted basket of S&P 500 puts and calls over a range of strike prices. Essentially, based on the price of the options, it tells us where the S&P 500 could be headed over the next 30 days. Generally, a rising VIX is associated with increased fear and uncertainty in the marketplace as well as falling stock prices, and vice versa for a declining VIX.

    Because volatility tends to revert to its long-term average, the VIX is most useful at its extremes. Low readings can indicate investor complacency, while high readings may suggest markets are nearing peak fear. The recent jump in implied volatility has pushed the VIX to its highest point since last fall. A decisive move above the November closing high at 26.42 would imply additional upside risk in the fear gauge. Conversely, a failure to break above that level, particularly if it occurs alongside a shift back to a normal, upward-sloping VIX futures curve, could indicate that fear is topping out. At present, the futures curve is in backwardation, with near-term contracts priced above longer-dated ones, a rare pattern typically associated with acute market stress. A return to contango, the normal shape of the curve in which longer-term futures trade at a premium to near-term contracts, would suggest that peak fear may have been reached. Plus, the volatility of the VIX does not reflect elevated longer-term fear, which we take as an encouraging sign that the market is confident that this conflict will be over in relatively short order and that lasting damage to global energy infrastructure will be limited.

    Bottom line: Market volatility has spiked as geopolitical risks rise, pushing the VIX toward key resistance levels. If the futures curve normalizes and the VIX fails to break higher, it may signal that investor fear is nearing a peak.

    Implied Stock Market Volatility Builds

    Source: LPL Research, Bloomberg 03/05/26
    Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Any commodities, options, or futures referenced are being presented as a proxy, not as a recommendation    .

    Conclusion

    Geopolitical events are difficult. It’s human nature to want to sell stocks and sit in cash. How long this conflict will last and how much inflation it might cause as oil and gas prices rise are uncertain. For long‑term investors, we believe there may be some reassurance in market history. Geopolitical events, while unsettling, typically do not cause significant damage to diversified portfolios. Pullbacks are common, but history tells us that stocks will display their resilience on the other side after the fog of war clears. Staying focused on the fundamentals of the economy and corporate profits, maintaining balanced allocations, avoiding emotional decisions, and focusing on the long-term can help investors navigate the coming weeks with confidence. We note that past performance does not guarantee future results.

    We pray for a safe return home for our brave servicemen and women in the Middle East.

    Asset Allocation Insights

    LPL’s Strategic Tactical Asset Allocation Committee (STAAC) maintains its tactical neutral stance on equities. As the war in Iran continues and oil prices have moved sharply higher, investors may be well served by bracing for additional volatility. The stock market’s resilient track record during geopolitical crises is reassuring, leaving STAAC to look for opportunities to potentially add equities at lower levels rather than remove equities due to what will likely be short-term market disruption. Technically, the broad market’s long-term uptrend remains intact.

    STAAC’s regional preferences across the U.S., developed international, and emerging markets (EM) are aligned with benchmarks. Attractive valuations in non-U.S. equities are offset by upward pressure in the U.S. dollar, although the Committee continues to watch EM closely for opportunities due to improvements in fundamentals and the technical analysis picture pre-Iran conflict.

    The Committee still maintains a slight preference for growth over value and large caps over small caps. In terms of domestic sectors, communication services remain an overweight, while the Committee continues to debate making a purchase on its shopping list, which includes healthcare, industrials, and technology.

    Within fixed income, the STAAC holds a neutral weight in core bonds, with a slight preference for mortgage-backed securities (MBS) over investment-grade corporates. The Committee believes the risk-reward for core bond sectors (U.S. Treasury, agency MBS, investment-grade corporates) is more attractive than plus sectors. The Committee does not believe adding duration (interest rate sensitivity) at current levels is attractive and remains neutral relative to benchmarks.

    Jeffrey Buchbinder, Chief Equity Strategist, LPL Financial

    Adam Turnquist, Chief Technical Strategist, LPL Financial

    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.

    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

    RES-0006767-0226 | For Public Use | Tracking #1075536  (Exp. 03/2027)

    Sorurce

  • Weekly Market Performance — March 6, 2026

    Weekly Market Performance — March 6, 2026

    LPL Research’s Latest Blog Posts

    Last Updated: 

    LPL Research provides its Weekly Market Performance for the week of March 2, 2026. Capital markets faced a challenging start to March as geopolitical tensions between the U.S. and Iran, rising oil prices, and renewed inflation concerns pressured global equities and bonds. While U.S. stocks showed some signs of resilience with multiple daily gains and losses off session lows, both domestic and international markets ultimately declined amid energy supply fears and shifting rate‑cut expectations. Fixed income struggled alongside rising Treasury yields, and commodities — especially crude oil — surged on supply disruption risks. Gold failed to draw much of a haven bid, while the U.S. dollar advanced.

    Stock Index Performance

    Index Week-Ending One Month Year to Date
    S&P 500 -1.75% -2.51% -1.27%
    Dow Jones Industrial -2.89% -5.09% -1.04%
    Nasdaq Composite -0.59% -2.16% -3.05%
    Russell 2000 -3.75% -5.12% 2.09%
    MSCI EAFE -6.53% -4.01% 2.57%
    MSCI EM -8.06% -4.22% 5.16%

    S&P 500 Index Sectors

    Sector Week-Ending One Month Year to Date
    Materials -7.00% -2.71% 9.40%
    Utilities -1.72% 7.79% 9.40%
    Industrials -3.81% -1.71% 9.70%
    Consumer Staples -5.10% -3.46% 10.06%
    Real Estate -2.14% 2.37% 6.80%
    Health Care -4.57% -3.16% -1.49%
    Financials -1.85% -7.01% -8.08%
    Consumer Discretionary -1.08% -1.96% -4.85%
    Information Technology 0.70% -1.98% -4.95%
    Communication Services -1.88% -2.68% -1.62%
    Energy 1.45% 5.78% 26.21%

    Fixed Income and Commodities

    Indexes and Commodities Week-Ending One Month Year to Date
    Bloomberg U.S. Aggregate -0.86% 0.48% 0.87%
    Bloomberg Credit -0.74% 0.29% 0.72%
    Bloomberg Munis -0.71% 0.22% 1.47%
    Bloomberg High Yield -0.09% -0.02% 0.60%
    Oil 36.50% 43.95% 59.32%
    Natural Gas 10.74% -7.48% -14.11%
    Gold -2.24% 3.95% 19.47%
    Silver -10.00% 8.44% 17.78%

    Source: LPL Research, Bloomberg 3/6/26 @3:04 p.m. ET
    Disclosures: Indexes are unmanaged and cannot be invested in directly.

    U.S. and International Equities

    U.S. Equities: Equities opened the new month on a cautious note as investors took some risk off the table in response to geopolitical developments in the Middle East between the U.S. and Iran. After a fairly muted initial reaction and rising two out of five days this week, major equity averages succumbed to downside pressure as missile and drone strikes over the weekend continued through the workweek, with the main headwind for stocks broadly stemming from inflation concerns as crude oil prices spiked as a result of the conflict effectively closing the Strait of Hormuz. However, investors showed some relative resilience amid a few bright spots in the headlines. Highlights included Washington stating its intent to protect via naval escorts and provide insurance support to oil tankers in the Strait to aid the flow of oil shipments, as well as reports (albeit unverified) of Iran contacting U.S. authorities and President Trump’s late-week remarks that Iran wants to make a deal. An improving ISM services index and easing price pressures were also among bright spots, and a rise in Federal Reserve (Fed) rate cut bets following a weaker than expected payrolls print did little to directionally sway markets.

    On the earnings front, a few high-profile names delivered quarterly reports this week, including Target (TGT) offering an upbeat forecast, as well as chipmaker and index heavyweight Broadcom (AVGO) posting strong semiconductor revenue projections. Energy led gains, followed by technology despite volatile trading Thursday on reports that Washington is considering chip export restrictions.

    International Equities: Following an all-time high last Friday, investors of European equities also pulled away from riskier pockets of the markets, leaving the STOXX 600 sharply lower as the energy-sensitive region digested the impact of rising oil prices. Market pricing for a 2026 rate hike from the European Central Bank (ECB) also dented investor sentiment. In corporate news, Dutch chipmaker ASM posted better than expected fourth quarter orders.

    Asian markets also closed lower, broadly weighed down by a stronger dollar in addition to the oil-driven headwind. Like much of the globe, energy supply jitters and geopolitical worries were the primary market drivers this week that left South Korea, Taiwan, and Japan sharply lower. Greater China was a relative outperformer, with shares receiving a boost from homegrown tech enthusiasm after the National People’s Congress (NPC) indicated more support for technological innovations and breakthroughs as well as easing concerns over the sector’s profitability and improved valuations after underperforming to start the year.

    Fixed Income, Currency, and Commodity Markets

    Fixed Income: Core bonds, measured by the Bloomberg Aggregate Index traded lower as U.S. Treasury yields moved higher over the last five days.

    Earlier this year, the decline in Treasury yields was driven in part by concerns that rapid AI adoption could slow economic growth through labor displacement. While those growth concerns have not gone away, the recent rise in inflation expectations has mostly reversed that yield move. Ongoing tensions in Iran continue to support higher oil prices, pushing near‑term inflation expectations higher; the two‑year Treasury Inflation-Protected Securities (TIPS) breakeven has risen above 3% for the first time since last April. Those near‑term inflation concerns drove the two‑year Treasury yield to its highest level since last November. Fed rate‑cut expectations also continue to decline, with markets now pricing in fewer than two cuts later this year — down from expectations of three cuts just a few weeks ago. Higher inflation expectations are also pressuring global bond yields and reducing central bank easing expectations, with markets now pricing in more than a full rate hike from the European Central Bank later this year. Fed Governor Chris Waller noted Friday morning that if the oil shock proves temporary, the Fed will likely look through the recent rise in prices — suggesting markets may be overestimating the reduction in rate‑cut prospects.

    Corporate credit markets remain stable, with investment‑grade and high‑yield spreads narrowing slightly this week. Spreads on CCC‑rated bonds have also tightened, indicating that bond‑market concerns remain centered on inflation rather than slowing economic growth. Taken together, rising inflation expectations and persistent artificial intelligence‑related growth concerns argue for continued caution and support our view that it is still too early to add rate exposure.

    Commodities and Currencies: The broader commodities complex traded sharply higher this week, with the energy complex top of mind amid the conflict in Iran. Oil prices surged with the North American benchmark West Texas Intermediate (WTI) crude prices rallying 36% to around $91 per barrel and the London-traded global benchmark Brent crude adding 27% to over $92 per barrel. The oil spike was largely driven by the de facto closure of the Strait of Hormuz sparking concerns of a global energy crunch. The strait sees roughly 20% of the global oil supply pass through its waters, or roughly 20 million barrels of oil and an additional 5 million in product per day. Crude oil gains were exacerbated to close the week on reports of production cuts and potential export halts. Elsewhere, gold prices traded lower and silver also dropped as haven bids were very limited with strength in the dollar and forced deleveraging mostly to blame. The U.S. Dollar Index added over 1% on the week while foreign currencies with the worst net energy trade balances underperformed even further.

    Economic Weekly Roundup

    Strikes Played a Partial Role in the Negative Print. Strikes at a major healthcare company impacted February’s payroll report released Friday. Even with last month’s broad-based declines, total payrolls still grew roughly 34,000 year to date.

    • February payrolls shrank 92,000 after a revised increase of 126,000 in January (down from the 130,000, which was previously reported).
    • The unemployment rate rose to 4.44% from 4.32%. We expect this to rise in the coming months, adding concern for policy makers.
    • Retailers and financial firms were the only two sectors that added to payrolls but the gains in the financial sector were unable to fully recover the 30,000 lost in January.
    • Underlying conditions are stable. Both the labor force participation rate, at 62.0%, and the employment-population ratio, at 59.3%, changed little in February. These measures showed little change over the year.

    Bottom Line: After lackluster job gains in 2025, the labor market is coming to a standstill. The three-month average is 6,000 net new jobs, and the six-month average is negative for the fourth time in five months. Looking ahead, we should expect the unemployment rate to rise. We don’t expect the Fed to take action sooner than June, but if the labor market deteriorates faster than expected, officials could cut rates on April 29.

    The Week Ahead

    The following economic data is slated for the week ahead:

    • Monday: New York Fed One-Year Inflation Expectations (Feb)
    • Tuesday: NFIB Small Business Optimism (Feb), Existing Home Sales (Feb)
    • Wednesday: MBA Mortgage Applications (Mar 6), Headline and Core CPI (Feb), Real Average Hourly and Weekly Earnings (Feb), Federal Budget Balance (Feb)
    • Thursday: Trade Balance (Jan), Initial Jobless Claims (Mar 7), Continuing Claims (Feb 28), Housing Starts (Jan), Building Permits (Jan preliminary), Household Change in Net Worth (4Q)
    • Friday: Personal Income and Spending (Jan), Real Personal Spending (Jan), Headline and Core PCE Price Index (Jan), Durable Goods Orders (Jan preliminary), Cap Goods Orders and Shipments (Jan preliminary), GDP (4Q second reading), Personal Consumption (4Q second reading), Core PCE Price Index (4Q second reading), University of Michigan Consumer Sentiment Report (Mar preliminary), JOLTS Jobs Report (Jan)

    Important 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. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

    Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

    Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

    This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

    Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. 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.

    Asset Class Disclosures –

    International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

    Bonds are subject to market and interest rate risk if sold prior to maturity.

    Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

    Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.

    Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

    Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

    High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

    Precious metal investing involves greater fluctuation and potential for losses.

    The fast price swings of commodities will result in significant volatility in an investor’s holdings.

    This research material has been prepared by LPL Financial LLC.

    Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value

    For Public Use – Tracking: #1075789

  • Managed Futures: Current Positioning and Geopolitical Risks

    Managed Futures: Current Positioning and Geopolitical Risks

    Michael McClain | Alternative Investment Research Analyst and Due Diligence

    Last Updated: 

    Managed futures strategies, also known as Commodity Trading Advisors (CTAs) or trend-followers, are designed for environments where macro shifts drive persistent price trends across equity, bond, commodity, and currency markets. As geopolitical risk has spiked due to the conflict with Iran, the current backdrop will present a unique test for investment strategies.

    Current Positioning

    Using the SG Trend Indicator from Societe Generale Prime Services as an industry proxy, the most recent positioning by asset class is below. Note, depending on a manager’s individual contracts traded and portfolio construction process, exposures will differ from this. The SG Trend Indicator uses a 20-day/120-day moving average crossover for signal generation. The longer this signal is intact, the larger the position size, however, scaled for expected volatility.

    • Equities: Except for a short NASDAQ futures position, there is long exposure across domestic and international developed equity markets.
    • Commodities: Long exposure across precious/base metals, crude oil, and livestock contracts. Short exposure within agricultural contracts such as coffee, cocoa, and cotton.
    • Bonds: Mixed long and short exposure depending on region and maturity levels. Short middle of the U.S. Treasury curve, however, limited directional exposure overall.
    • Currencies: Long euro, British pound, Canadian dollar, and peso versus the U.S. dollar. Long U.S. dollar versus the Japanese yen.

    Potential Impact of Rising Geopolitical Risk

    Historically, similar periods have caused a rush to safe-haven assets, the selling of risk, and a sharp increase in energy prices. Below, we have the potential impact based on the positioning described above:

    • Equities: If equity markets continue to sell off, there may be a short-term drag on overall performance due to current long exposure. However, as signals are moderate, a sharp or extended decline could lead to outright short positioning.
    • Commodities: Crude oil prices have already experienced a sharp increase, supporting existing long exposure.
    • Bonds: Increasing demand for Treasuries is expected during periods of market volatility. As current Treasury exposure is mixed, investor demand across the yield curve may drive any shifts in exposure.
    • Currencies: A flight to safe-haven currencies would negatively impact existing short U.S. dollar exposure over the short-term.

    LPL Research Takeaway

    The Iran conflict has introduced significant macro risk and volatility into global markets. For managed futures, this environment underscores their purpose of providing dynamic diversification by investing long and short across equity, bond, currency, and commodity futures. Over the short-term, we expect current long energy exposure to drive gains, however, long equity and short U.S. dollar exposure are expected to weigh on returns. For managed futures to deliver as a source of crisis alpha, price trends need to persist, or many strategies and signals will be whipsawed and constantly reversing – one of the worst possible environments for the industry. Overall, within managed futures, we continue to favor holding a diversified mix of sub-strategies, including but not limited to, short-term momentum, volatility breakout, pattern recognition, and trend following. Diversification within trend following in terms of markets and time frame is encouraged as well.

    Important 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. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

    Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

    Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

    This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

    Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. 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.

    Asset Class Disclosures –

    International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

    Bonds are subject to market and interest rate risk if sold prior to maturity.

    Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

    Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.

    Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

    Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

    High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

    Precious metal investing involves greater fluctuation and potential for losses.

    The fast price swings of commodities will result in significant volatility in an investor’s holdings.

    This research material has been prepared by LPL Financial LLC.

    Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value

    For Public Use – Tracking: #1074051

  • Iran Escalation: How Markets Have Reacted to Geopolitical Events

    Iran Escalation: How Markets Have Reacted to Geopolitical Events

    George Smith | Portfolio Strategist

    Last Updated: 

    Additional content provided by Kent Cullinane, Sr. Analyst, Research.

    As with the recent escalation in the Middle East, financial markets are constantly exposed to unpredictable events — from geopolitical conflicts and terror attacks to political transitions, corporate crises, and systemic financial shocks. While each new development tends to generate uncertainty and anxiety, history consistently shows that markets are far more resilient than most investors expect.

    Reviewing market reactions across more than eight decades of market history helps us understand how stocks typically behave when the unexpected happens, and which conditions matter most to determine the likely depth and duration of any drawdowns. It is important to note that past performance does not guarantee future results.

    Immediate Market Reactions: Sometimes Sharp but Often Short-Lived

    Across more than two dozen major geopolitical events since World War II, the S&P 500 has produced an average one-day decline of just -1%. In other words, even seemingly dramatic world events tend to trigger declines that are notable, but not catastrophic. Typically, markets tend to absorb shocks quickly, stabilize (bottoming on average within 18 days), and recover within a matter of weeks (the average time taken for the S&P 500 to get back to pre-event levels is under 39 days). Importantly, the scale of the initial event rarely predicts the magnitude of the market impact.

    Stocks Largely Take Geopolitical Events in Stride

    S&P 500 Index Returns and Select Geopolitical Event

    Market Shock Events Event Date One Day Total Drawdown Bottom (Days) Recovery (Days)
    Pearl Harbor Attack 12/7/1941 -3.8% -19.8% 143 307
    North Korea Invades South Korea 6/25/1950 -5.4% -12.9% 23 82
    Hungarian Uprising 10/23/1956 -0.2% -0.8% 3 4
    Suez Crisis 10/29/1956 0.3% -1.5% 3 4
    Cuban Missile Crisis 10/16/1962 -0.3% -6.6% 8 18
    Kennedy Assassination 11/22/1963 -2.8% -2.8% 1 1
    Gulf of Tonkin Incident 8/2/1964 -0.2% -2.2% 25 41
    Six-Day War 6/5/1967 -1.5% -1.5% 1 2
    Tet Offensive 1/30/1968 -0.5% -6.0% 36 65
    Munich Olympics 9/5/1972 -0.3% -4.3% 42 57
    Yom Kippur War 10/6/1973 0.3% -0.6% 5 6
    Reagan Shooting 3/30/1981 -0.3% -0.3% 1 2
    Iraq’s Invasion of Kuwait 8/2/1990 -1.1% -16.9% 71 189
    U.S. Terrorist Attacks 9/11/2001 -4.9% -11.6% 11 31
    Madrid Bombing 3/11/2004 -1.5% -2.9% 14 20
    London Subway Bombing 7/5/2005 0.9% 0% 1 4
    Boston Marathon Bombing 4/15/2013 -2.3% -3.0% 4 15
    Bombing of Syria 4/7/2017 -0.1% -1.2% 7 18
    North Korea Missile Crisis 7/28/2017 -0.1% -1.5% 14 36
    Saudi Aramco Drone Strike 9/14/2019 -0.3% -4.0% 19 41
    Iranian General Killed in Airstrike 1/3/2020 -0.7% -0.7% 1 5
    U.S. Pulls Out of Afghanistan 8/30/2021 0.4% -0.1% 1 3
    Escalation of Russia/Ukraine Conflict 2/17/2022 -2.1% -6.8% 13 23
    Israel-Hamas War 10/9/2023 0.3% -4.5% 14 19
    Iran Attacks on Israel 4/14/2024 -1.2% -3.0% 5 15
    U.S-Israeli Attacks on Iran 6/21/2025 1.0% 0% 0 0
    Iranian Supreme Leader Killed 2/28/2026 0% ? ? ?
    Average -1.0% -4.4% 17.9 38.8

    Source: LPL Research, Bloomberg, FactSet, S&P Dow Jones Indices, CFRA, Strategas 3/2/26
    Disclosure: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. The modern design of the S&P 500 index was first launched in 1957. Performance before then incorporates the performance of its predecessor index, the S&P 90.

    How do Stocks Perform After Major Events?

    Looking at a wider list of historical events, from Pearl Harbor to the Cuban Missile Crisis, from the 1987 stock market crash to 9/11, and from Brexit to the Russia–Ukraine conflicts, stocks have repeatedly demonstrated resilience. The consistent takeaway is that shocks cause volatility, but rarely change the long-term trajectory of the economy unless accompanied by deeper fundamental stress.

    In reviewing more than 40 major events, from wars to political resignations, corporate failures, terror attacks, natural disasters, currency crises, and pandemics, a few universal lessons emerge:

    • Markets dislike uncertainty but tend to adapt quickly.
    • The economic backdrop matters more than the event itself.
    • Shocks rarely alter long-term fundamentals, though sometimes can deepen a recession.

    How Do Stocks Perform After Major Events?

    S&P 500 Index Performance After Select Major Geopolitical and Historical Events

    Market Shock Events Event Date 1 Month 3 Months 6 Months 12 Months Near a Recession
    Germany Invades France 5/10/1940 -19.9% -12.7% -4.5% -18.7 No
    Pearl Harbor Attacks 12/7/1941 -1.0% -11.0% -6.5% 4.3% No
    North Korea Invades South Korea 6/25/1950 -10.0% 1.6% 4.1% 11.7% No
    Hungarian Uprising 10/23/1956 -2.1% -2.8% -1.3% -11.7% Yes
    Suez Crisis 10/29/1956 -4.4% -3.6% 0% -11.6% Yes
    Cuban Missile Crisis 10/16/1962 5.1% 14.1% 20.7% 27.8% No
    Kennedy Assassination 11/22/1963 6.8% 11.9% 15.5% 23.2% No
    Gulf of Tonkin Incident 8/2/1964 -1.6% 1.9% 5.3% 2.7% No
    Six-Day War 6/5/1967 3.3% 5.9% 7.5% 13.5% No
    Tet Offensive 1/30/1968 -3.8% 5.1% 5.2% 10.2% No
    Penn Central Bankruptcy 6/21/1970 -0.1% 7.2% 16.8% 28.6% Yes
    Munich Olympics 9/5/1972 -1.0% 5.7% 2.3% -5.8% No
    Yom Kippur War 10/6/1973 -3.9% -10.7% -15.3% -43.2% Yes
    Oil Embargo 10/16/1973 -7.0% -13.2% -14.4% -35.2% Yes
    Nixon Resigns 8/9/1974 -14.4% -7.0% -2.8% 6.4% Yes
    Reagan Shooting 3/30/1981 -0.9% -1.8% -14.0% -16.4% Yes
    Continental Illinois Bailout 5/9/1984 -3.1% 1.0% 6.4% 12.8% No
    1987 Stock Market Crash 10/19/1987 8.1% 10.9% 14.7% 22.9% No
    Iraq’s Invasion of Kuwait 8/2/1990 -8.2% -13.5% -2.1% 10.1% Yes
    Soros Breaks Bank of England 9/16/1992 -2.5% 3.0% 6.8% 9.9% No
    First World Trade Center Bombing 2/26/1993 1.7% 2.0% 4.0% 4.7% No
    Asian Financial Crisis 10/8/1997 -3.7% -1.8% 14.1% -1.5% No
    U.S.S. Cole Yemen Bombing 10/12/2000 2.7% -0.9% -11.3% -19.6% Yes
    U.S. Terrorist Attacks 9/11/2001 -0.2% 2.5% 6.7% -18.4% Yes
    Iraq War Started 3/20/2003 1.9% 13.6% 18.7% 26.7% No
    Madrid Bombing 3/11/2004 3.5% 2.7% 1.5% 8.4% No
    London Subway Bombing 7/5/2005 3.3% 1.8% 5.3% 5.5% No
    Bear Stearns Collapses 3/14/2008 3.6% 5.6% -2.8% -41.5% Yes
    Lehman Brothers Collapses 9/15/2008 -16.3% -26.2% -34.8% -11.7% Yes
    Boston Marathon Bombing 4/15/2013 6.3% 8.4% 9.7% 17.9% No
    Russia Annexes Crimea 2/20/2014 1.5% 2.6% 8.0% 14.7% No
    BREXIT 6/24/2016 6.5% 6.2% 11.0% 19.7% No
    Bombing of Syria 4/7/2017 1.8% 3.1% 7.6% 12.8% No
    North Korea Missile Crisis 7/28/2017 -1.1% 3.6% 14.8% 13.4% No
    Saudi Aramco Drone Strike 9/14/2019 -1.4% 5.4% -8.8% 12.5% Yes
    Iranian General Killed in Airstrike 1/3/2020 1.9% -23.1% -4.2% 14.4% Yes
    U.S. Pulls Out of Afghanistan 8/30/2021 -3.7% 2.8% -4.34% -12.0% No
    Escalation of Russia/Ukraine Conflict 2/17/2022 1.8% -10.9% -2.2% -6.9% No
    Israel-Hamas War 10/7/2023 1.6% 9.0% 20.8% 32.2% No
    Iran Attacks on Israel 4/14/2024 2.4% 9.9% 14.4% 5.5% No
    U.S-Israeli Attacks on Iran 6/21/2025 1.2% 12.2% 15.3% ? No
    Iranian Supreme Leader Killed 2/28/2026 ? ? ? ? ?
    Average -1.1% 0.5% 3.1% 3.0%
    Average if no recession 0.2% 3.8% 8.0% 9.8%
    Average if recession -3.6% -5.9% -6.3% -9.8%

    Source: LPL Research, Bloomberg, FacSet, S&P Dow Jones Indices, CFRA, Strategas 03/03/26
    Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. The modern design of the S&P 500 index was first launched in 1957. Performance before then incorporates the performance of its predecessor index, the S&P 90.

    The Real Differentiator: Recession vs. No Recession

    The single most important factor determining market performance after a shock is whether the economy is already in or near a recession. If a shock occurs during an expansion, then markets are typically flat to modestly positive over the next month followed by positive returns over the next three, six, and 12 months (average 12-month post-shock return in non-recessionary periods: +9.8%). However, if a shock occurs near a recession, markets tend to fall across all timeframes, and the average 12-month post-shock return near recessions is -9.8%. This pattern makes intuitive sense: shocks can add volatility, but they rarely derail a fundamentally sound economy; however, if conditions are already fragile, the event can accelerate or amplify existing weakness.

    Cross Asset Market Behavior During Shock Events

    Equities: Shock events often temporarily rotate leadership toward utilities, staples, gold miners, and defense stocks. Growth-oriented and cyclical sectors typically lag amid growth fears during the volatility window, but rebound as uncertainty fades. Other equity asset classes tend to behave in somewhat predictable ways with small caps tending to lag as volatility increases, and a strong U.S. dollar, often a safe haven in times of geopolitical conflict, also tends to weigh on (unhedged) non-U.S. equities.

    Fixed Income: Shock events tend to trigger flight-to-safety buying, pushing Treasury yields lower as rate policy expectations adjust, particularly if growth expectations deteriorate. If energy prices are affected due to supply disruptions (e.g., in an oil shock) and inflation expectations rise, yields may initially move higher before falling back as risk aversion builds.

    Oil and the Energy Sector: Energy markets frequently embed a temporary risk premium following geopolitical stress. Historically, and as markets exhibited this week, oil prices spike on perceived supply risk, energy equities often outperform, but price pressures fade once physical supply and distribution prove resilient.

    Gold and Precious Metals: Gold remains one of the most reliable safe haven assets during global shocks. Patterns typically seen include strong initial inflows and continued strength when/if inflation expectations rise as a result of the shock. However, as evidenced in trading on March 3, a surging dollar on safe-haven flows can put downward pressure on precious metals, especially when the metals are technically overbought after a strong rally.

    Conclusion: Shock Events are Unsettling but Typically Secondary Drivers for Markets

    While global disruptions can feel destabilizing in real time, history supports a disciplined, long-term investment approach, though past performance does not guarantee future results. Shock events introduce volatility, but rarely do lasting damage, unless underlying economic conditions are already deteriorating. For investors, we believe the key is not to predict the next headline, but to understand the cycle, maintain diversification, and try to avoid emotional decision-making during periods of short-term turbulence. The LPL Research Strategic and Tactical Asset Allocation Committee (STAAC) maintains its neutral tactical stance on equities but continues to monitor developments in the Middle East closely to determine the potential impact on the energy sector, broader equity markets, gold and precious metals, and the path of interest rates.

    Important 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. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

    Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

    Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

    This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

    Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. 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.

    Asset Class Disclosures –

    International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

    Bonds are subject to market and interest rate risk if sold prior to maturity.

    Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

    Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.

    Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

    Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

    High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

    Precious metal investing involves greater fluctuation and potential for losses.

    The fast price swings of commodities will result in significant volatility in an investor’s holdings.

    This research material has been prepared by LPL Financial LLC.

    Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value

    For Public Use – Tracking: #1073427

  • How LPL Research Thinks About Dividends

    How LPL Research Thinks About Dividends

    Last Edited by: LPL Research

    Last Updated: March 02, 2026

    PRINTER FRIENDLY VERSION

    Dividend strategies, a.k.a. equity income strategies, have outperformed to start the year, owing to the value-led cyclical rotation we are seeing in domestic equity markets. Looking beyond current performance, this week, we ask and answer the question “How should I think about dividend stocks or building an equity income portfolio?”

    Executive Summary

    The idea of lying on the beach while your money works for you is often idealized in the financial media and by financial professionals alike. And why not? Investors love passive income, whether it comes from interest payments via fixed income securities, rental income from a real estate investment, or dividends from a stock portfolio. Our focus is on dividends, and understanding different approaches investors can incorporate into equity allocations. In this week’s Weekly Market Commentary, we analyze different equity income strategies, explain why we believe incorporating quality makes sense, and review technical charts to understand what’s potentially on the horizon for the near-term performance of different equity income strategies.

    Key Takeaways

    · Look Beyond Simple Dividend Yields. Our research shows that building a systematic dividend income strategy based solely on high dividend yields underperforms strategies based on total shareholder yield (dividend + buyback yield) or dividend growth.

    · Pay Attention to Price-Based Returns. When analyzing equity income strategies, it is important to consider both sources of total return: current income and price-based returns (i.e., capital appreciation). Myopically focusing on total return ignores many real-world considerations like taxes, transaction costs, and current income requirements.

    · Keep Quality Front of Mind. Given the susceptibility of high-dividend strategies to unknowingly fall into value- or yield-traps, we suggest “paying up” (i.e., accepting a slightly lower yield) to increase quality in any equity income portfolio, but especially in one focused solely on high dividend yields.

    · What’s Working Today? Dividend-oriented equities remain in strong uptrends, supported by solid momentum and improving relative strength versus the broader market. The simple dividend yield strategy is currently leading on a short term basis, but longer-term relative trends favor continued outperformance from dividend growth and shareholder yield within the dividend stock landscape.

    Equity Income: More Than Just Dividend Yields

    For many investors, the desire for yield is a bedrock of their portfolio construction strategy. In this pursuit, dividend-paying stocks are often chosen for a portfolio’s equity allocation, providing a tangible cash return alongside the potential for capital appreciation. The starting point for most investors when building a portfolio of dividend paying stocks is the dividend yield. It is a straightforward, easily calculated figure that provides a framework for stock selection. Simply choose among the highest dividend yields to generate the highest level of income relative to capital invested. This dividend yield approach serves as a baseline strategy for comparison.

    We propose an alternative framework for building or selecting an equity income portfolio, built around two enhanced strategies. The first is dividend growth, which shifts the focus from the level of the dividend today to the durability and consistent growth of the dividend over time. The second is shareholder yield, a more comprehensive metric that captures the total capital returned to shareholders by combining dividends with net share buybacks.

    There is empirical evidence, by way of established third-party equity indexes, that enhanced equity income strategies such as these have generated compelling returns relative to simple high dividend yield strategies. Indexes that follow a shareholder yield index, such as the Morningstar U.S. Dividend and Buyback Index and those that follow a dividend growth index, like the S&P U.S. Dividend Growers Index have generated higher total return (inclusive of reinvested dividends) as well as higher capital appreciation (measured by cumulative price returns) than a basic high dividend yield index like the S&P 500 High Dividend Index.

    Historical Total Returns Are Compelling for Enhanced Dividend Strategies

    Source: LPL Research, Bloomberg, 12/31/2025; Monthly Cumulative Total Returns (June 2006–December 2025)

    Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

    Price-Based Returns Have Driven Dispersion Among Equity Income Strategies

    Source: LPL Research, Bloomberg, 12/31/2025; Monthly Cumulative Price Returns (June 2006–December 2025)

    Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

    As we previously wrote (Exploring Equity Income: Mapping Key Approaches), the underperformance of high dividend payers have several possible explanations, with the simplest being that the high dividend payers are potentially allocating too much capital to cash dividends and not enough to reinvesting in the growth of the business. There are tradeoffs, however, as the high dividend yield index has a current yield that is 80% higher than the shareholder yield index, 2x higher than the dividend growth index, and 3.3x higher than the broad market (measured by the Russell 1000 Index).

    Capital Appreciation Tradeoff: High-Dividend Strategies Provide Higher Current Income

    Source: LPL Research, Bloomberg, 12/31/2025; Index Level Dividend Yield (As of 12/31/2025)

    Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

    In the following sections, we will dig into the underlying structure of these approaches, including the economic rationale for each (the what), attempt to understand the drivers of historical performance (the what happened and why), and review of the current technical setups of the three indicative indexes to shed light on recent price trends (the what’s happening now).

    A Framework for Analyzing Equity Income Strategies

    We begin by defining our three core dividend strategies and their representative indexes: dividend yield (S&P 500 High Dividend Index), dividend growth (S&P U.S. Dividend Growers Index), and shareholder yield (Morningstar U.S. Dividend and Buyback Index). We will dive deeper into the economic rationale for why we believe the enhanced equity income strategies have outperformed historically, and then explain why we believe that integrating quality may improve any of the core equity income strategies.

    The “Control” Strategy: Dividend Yield

    The simplest approach, and our core “control” strategy, is dividend yield. This method of generating equity income starts and ends simply by screening a universe of stocks for the highest dividend yield and buying them. The appeal lies in its simplicity and its maximalist approach to generating current income.

    However, this simple approach is fraught with hidden risks and flawed assumptions. First off, the strategy is agnostic to the sustainability of the dividend or the health of the underlying business. When a declining share price is driving a dividend yield higher, investors will need to understand whether the declining share price represents a temporary dislocation, or a structural impairment in the fundamentals of the business. Conversely, a high dividend payout ratio driving a stock’s dividend yield higher could prove unsustainable and lead to a dividend cut or suspension. The cumulative price-based performance of the dividend yield strategy relative to the enhanced equity income strategies highlights this risk and is representative of a key finding in our research, namely it suggests that the dividend yield strategy is a “capital treadmill”, i.e., its high dividend comes at the cost of a stagnant capital base.

    The “GARP” Approach: Dividend Growth

    The dividend growth strategy is a growth-ier approach to equity income, better suited for growth-oriented investors. This strategy prioritizes a company’s ability to consistently grow earnings and free cash flow, and therefore its ability to increase its dividend, rather than the level of its current dividend yield. The underlying assumption is that a steadily growing dividend is one of the strongest indicators of a healthy, high-quality business. Our belief is that a company must possess a durable competitive advantage, disciplined management, and confidence in its future earnings to commit to increasing its dividend year after year. Additionally, consistent dividend growth would seem to naturally filter out companies with volatile earnings or weak balance sheets. The resulting portfolio would therefore likely be composed of mature “cash cow” companies that are leaders in their respective industries, and thus exhibit not only higher exposure to growth factors but also quality factors such as profitability, earnings stability, and solvency.

    Because the focus is on the growth of the dividend, the overall portfolio yield of the strategy is generally lower, but historical performance suggests that the potential capital appreciation is higher. Both insights show up in Price-based Returns Have Driven Dispersion Among Equity Income Strategies and Capital Appreciation Tradeoff: High Dividend Strategies Provide Higher Current Income. The upshot is this strategy may produce high “cost-based dividend yields” within the portfolio (using cost-basis, as opposed to current price, as the denominator in the dividend yield calculation). This approach is best characterized as a “Growth at a Reasonable Price” (i.e., “GARP”) strategy.

    The “Quality Value” Approach: Shareholder Yield

    A more holistic framework for identifying equities with attractive capital outlays to investors is shareholder yield. This strategy recognizes that dividends are but one method companies leverage to return capital to their owners (i.e., shareholders). Shareholder yield provides a more complete picture by combining two key components: dividends + share buybacks (net of share issuance, thus neutralizing dilutive policies such as share-based compensation). This approach captures the total capital returned to shareholders (what you get) relative to the market capitalization of the company (what you pay). Our belief is that this approach effectively screens for business quality in two ways:

    1. Given that boards and management teams generally consider dividends to be “fixed” and share repurchases to be “variable”, summing up the two may provide a better signal of the robustness of the free cash flow used to fund the distributions.
    2. Including share repurchases as well as dividend payouts potentially signals a flexible, shareholder-friendly management team that opportunistically increases share repurchases when shares are trading below management’s estimate of intrinsic value.

    Note: Our naïve shareholder yield factor cannot accurately account for those potential opportunistic repurchases outlined in point number two. However, our research of two buyback factors (absolutely buyback level and buyback yield) suggests that incorporating yield (i.e., value) captures this phenomenon appropriately over the long term.

    At a portfolio level, we would generally expect this approach to produce a slightly lower dividend yield than a simple dividend yield strategy, but a higher yield than the dividend growth strategy (or the market broadly). This expectation is confirmed by the current yields of the representative indexes. Given the above point on management teams propensity to leverage buybacks as the marginal source of shareholder return, we would expect a shareholder yield strategy to have higher free cash flow margins and less leverage, and thus possess a stronger quality profile.

    Why We Believe Integrating Quality May Enhance Any Dividend Strategy

    It is our belief, based on our factor strategy research, that over the long-term integrating quality factors such as high profitability, low earnings volatility, low leverage, and high ratios of cash earnings to accounting earnings can lead to better risk-adjusted returns. As previously discussed, it is also our belief that the shareholder yield and dividend growth strategies inherently screen higher-quality fundamentals compared to our baseline dividend yield strategy. Therefore, it stands to reason that integrating quality factors may produce better risk-adjusted outcomes for any equity income strategy. For the enhanced strategies, we surmise that increasing the already present quality exposure may result in a less volatile portfolio that generates higher risk-adjusted returns, with the likely tradeoff being lower current dividend yields. Where quality integration may help the most is the core dividend yield strategy.

    We highlighted the inherent risks in the simple dividend yield strategy; that (a) a high yield due to a falling share price may signal weakness in the underlying fundamentals of the business or that (b) high dividend payout ratios may starve the business of necessary capital investment to maintain or grow cash-generating activities. Layering in a quality screen may reduce these risks, though at a likely reduction in current dividend yields (similar to the expected experience with the enhanced strategies).

    There are multiple ways an investor can accomplish this. Bottoms-up fundamental research on each high dividend yielding stock is one. For the quantitatively inclined, integrated factor scores or factor quantile screens can also be leveraged. The former would entail standardizing the dividend yield factor and a quality composite factor and blending the standardized z-score, using a weighting scheme of your choice (we’d suggest an equal-weight 50/50 split). The latter would involve sequentially screening a universe for the top dividend yield quantile (such as a top 20% quintile, or a decile approach that screens for the 2nd and 3rd top deciles), and then screening it for the top quality factor quantile among that sub-population.

    Current Technical Setup: Dividend Stocks Continue to Climb

    • S&P 500 High Dividend Index (dividend yield): The index has seen a sharp acceleration over the past month as declining yields have boosted the relative attractiveness of dividend‑oriented stocks. Sector positioning has also been supportive, benefiting from a rotation toward value and away from mega‑cap tech and AI‑related disruption risks. (Real estate represents roughly 25% of the index and consumer staples about 18%.) From a technical perspective, the index is consolidating within a short‑term bullish flag pattern after breaking above resistance at the 2024 highs. A close above 9,445 would confirm a breakout and open the door to a target of 10,175 — approximately 9% above current levels. Relative performance versus the Equal Weight S&P 500 Index has improved notably in recent months, though it remains below a longer‑term downtrend. A sustained move above the August 2025 highs on the ratio chart would signal a new uptrend and point to more durable outperformance ahead.
    • S&P 500 U.S. Dividend Growers Index (dividend growth): The index has climbed steadily above a consistent uptrend that has been in place since April 2025. Realized volatility has been exceptionally low, with the index registering a maximum drawdown over this period of only around 3%. Momentum indicators remain bullish, but not overbought, and point to further upside potential. On a relative basis, the S&P 500 U.S. Dividend Growers Index has broken out of a bottom versus the S&P 500, pointing to further runway for outperformance.
    • Morningstar U.S. Dividend and Buyback Index (shareholder yield): The index has continued to set new record highs after breaking out from a year‑long base last fall. Recent overbought conditions have normalized as prices pulled back to test uptrend support. Participation has been robust, with 75% of constituents now trading above their 200‑day moving average, a 25% improvement since November. Based on the prior consolidation range, a minimum technical upside objective sets up near 5,400, implying roughly 12% of potential upside from current levels. On a relative basis, the Morningstar U.S. Dividend and Buyback Index has reversed its downtrend versus the Morningstar U.S. Market Index and is now at multi‑month highs, indicating further potential for outperformance.

    Dividend Stocks Continue to Climb

    Source: LPL Research, Bloomberg, 02/26/26
    Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not materialize as predicted and are subject to change.

    Conclusion

    Our analysis of equity income strategies suggests there is value in a multi‑faceted approach that looks beyond dividend yields. The insights gleaned from this analysis apply to building rules-based screens or systematic “quant” strategies as well as supporting discretionary “quanta‑mental” investment processes, where factor insights inform, but do not replace fundamental judgment. Technical analysis suggests recent outperformance of the basic high dividend strategy may be fleeting and that both of the enhanced equity income strategies show better relative strength.

    Looking ahead, the historical results make clear that simple dividend screens may not be adequate for today’s market environment. As capital allocation practices evolve and corporate balance sheets continue to diverge in quality, the opportunity set for equity income investors will increasingly support looking to approaches that go beyond headline dividend yields. A continued shift toward strategies that balance income with capital appreciation (dividend growth), total shareholder return (shareholder yield), and balance‑sheet strength (quality integration) will be essential for generating more resilient outcomes over time.

    Adam Turnquist, Chief Technical Strategist, LPL Financial

    Tom Shipp, Head of Equity Research, LPL Financial

    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.

    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

    RES-0006767-0226 | For Public Use | Tracking #1071896  (Exp. 03/2027)

    Source

  • Risk-On Appetite Strong in 2026: Fund Flows Recap

    Risk-On Appetite Strong in 2026: Fund Flows Recap

    Jeff Buchbinder | Chief Equity Strategist

    Last Updated: 

    Additional content provided by Kent Cullinane, Sr. Analyst, Research.

    With February behind us, we conducted a deeper dive into exchange-traded fund (ETF) flows over the month and year-to-date (YTD) periods. Flows measure the net movement of cash into and out of investment vehicles, such as mutual funds and exchange-traded funds (ETF). We analyzed flows to gain insight on investor demand and sentiment surrounding asset classes, sectors, and other segments of markets.

    Broad Asset Class Flows

    At the broad asset class level, investors continued to pour into equity ETFs, which now represent 78% (~$11 trillion) of the total ETF market, with February realizing a net flow of $139 billion, putting the YTD flows at $214 billion. Despite the volatility, with the S&P 500 marginally up at 0.7% to start the year following a slight drawdown in February (-0.8%), capital continues to pile into stocks. The artificial intelligence (AI) trade that propelled equities higher over the last few years has begun to unwind with stocks in more AI-oriented industries (and some others threatened by AI cannibalizing their industries) leading markets lower. While some view the AI drawdown as a buying opportunity, others see cracks in the AI buildout starting to reverberate across other segments of the market. Nonetheless, stocks continue to see strong flows and have brought in nearly a trillion in assets over the trailing one-year period at month-end.

    Fixed income, following a strong 2025 as measured by the Bloomberg U.S. Aggregate Bond Index (AGG) rising 7.3%, saw meaningful flows in February at $57 billion, bringing the YTD total to $122 billion. Fixed income ETFs represent nearly 17% ($2.4 trillion) of the total ETF market, or roughly a quarter the size of the equity ETF market – combined they represent 95% of ETF assets. Although they are overshadowed by the equity market, they continue to punch above their weight by gathering more assets on a relative size basis. Despite the Federal Reserve’s (Fed) decision to lower interest rates three times in 2025, bonds continue to have an attractive yield relative to history and we believe core bonds (Treasurys, investment-grade corporate bonds, and mortgage-backed securities (MBS)) in particular represent an equally attractive risk-reward trade-off as equities. Investors looking to escape equity market volatility have been rewarded moving into the generally steadier, less volatile asset class.

    Across diversifying strategies, including commodities, alternative investments, currencies and allocation ETFs, commodities was the standout amassing $7.7 billion in assets in February, with YTD flows closing out the month at $13.6 billion. Commodities represent nearly 3% of the ETF marketplace with $417 billion in assets. One of the largest segments of the commodity market is precious metals, with gold being the dominant metal by market size and volume. Gold surged in 2025, rising over 50%, as its safe haven status intrigued investors facing increased geopolitical uncertainty, expectations of lower interest rates (lower yields reduce the opportunity cost of holding gold), and a weaker U.S dollar (USD) (USD weakness increased the purchasing power of gold). The other diversifying strategies (alternatives, currency, and allocation) saw mixed flows over the month, with alternatives and allocation strategies gaining nearly $3.3 billion and $1.9 billion, respectively, and currency (which includes digital currencies) realizing an outflow of $1.6 billion – not surprising given the significant sell-off in digital assets, most notably Bitcoin (BTC) slashing nearly half its value since October’s all-time high.

    Investors Remain Risk-On Despite Choppy Equity Markets

    Trailing one-month, YTD, and one-year Net Asset Flows Across Broad Asset Classes (AUM, Billions $)

     

    Source: LPL Research, Factset, 2/27/26
    Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

    Asset Class Specific Flows

    Equities

    Within equities, U.S. large cap equities was the largest equity segment by flows over the month and YTD periods, gathering $24.7 billion and $28.2 billion, respectively. U.S. large cap equities dwarf all other segments in terms of assets at $3.7 trillion, representing nearly 26% of the ETF market, with the next closest segment (U.S. total market) at $1.3 trillion (~9%). While volatility has increased, leading investors to rotate out of high-flying growth stocks and into more defensive value stocks, domestic markets continue to benefit from AI, impressive corporate earnings, and the potential for lower interest rates and fiscal policy stimulus. Following U.S. large cap was emerging market (EM) equities, gathering nearly $13 billion and $28 billion over the month and YTD periods, respectively. Despite being the sixth largest segment by assets ($401 billion) – slightly more than a tenth the size of the U.S. large cap equities – according to the MSCI EM Index, EM experienced a stellar 2025, up over 30%, and a strong 2026 thus far, up 15%, as investors continue to pour into the region. EM equities have benefited from the weaker USD, solid growth and robust manufacturing (notably in the AI buildout), and its relative discount to developed market equities from a valuation perspective.

    What’s notable in equities is the amount of capital flowing into non-U.S. equities. As previously mentioned, emerging market equities received the second largest influx of capital over the month and YTD period, but what’s also significant is the money that’s moved into global ex-US total market and developed market ex-US equities, ranking third and fourth, respectively over the trailing one-month period. Despite a strong year from domestic stocks in 2025, with the S&P 500 up nearly 18%, most foreign equity markets were up 30% or more, as seen with the MSCI EM and MSCI EAFE indexes, and with investors most likely chasing performance.

    At the other end of the spectrum are sector specific ETFs, such as financials, information technology, utilities, consumer discretionary, and leveraged equity: semiconductors – all ranking in the bottom 10 flows by segment YTD. Within information technology lies the software industry, which has sold off meaningfully as the threat of AI begins to weigh on market valuations. Semiconductors, also in the information technology sector, have held up better, up 1.4% on the year. The selling of some leveraged semiconductor ETFs could be the result of the broader sentiment towards AI as investors have grown weary the emerging technology will not live up to expectations.

    Fixed Income

    In fixed income, core bond categories such as U.S. broad market investment grade bonds, ultra-short Treasurys, and U.S. corporate investment grade bonds all ranked in the top 10 by segment in trailing one-month flows, ranking seventh, eighth, and tenth respectively. While bonds represent a smaller proportion of ETF markets (17% vs. equities at 78%), they continue to attract investor capital, closing the gap, albeit marginally, on their equity peers. Not all bond segments fared well though – global bank loans, which recently have been exposed to the drawdown in private credit markets on AI disruption fears – experienced some of the largest outflows in February, losing over $2.2 billion in assets.

    Diversifying Strategies

    Across diversifying strategies, as noted earlier, gold continues its strong run from 2025, ranking as the eighth largest segment YTD in terms of flows, gaining $10.6 billion in assets. Although gold is a much smaller segment of the broader ETF market (2.3%), it’s consistently ranked in the top 10 segments by monthly flows as investors look to diversify from traditional stocks and bonds.

    Contrarily, while not a traditional fiat currency, digital assets have continued to see significant outflows as investors rotate away from highly speculative assets. The long BTC, short USD segment has realized the second and fourth most outflows over the trailing one month and YTD periods, respectively.

    While small in size, alternatives broadly have seen positive flows, with downside protection ETFs, or sometimes referred to as “buffer” ETFs, becoming more popular amongst investors as they try to protect their portfolios from drawdown risk with heightened volatility. Additionally, traditional hedge fund strategies, such as global macro, event driven, and managed futures, which are now being offered in ETF vehicles (although with stringent restrictions to stay within regulatory compliance), continue to gain assets. Collectively, these alternative strategies can be seen as defensive positions that offer uncorrelated return streams to traditional equities and fixed income.

    Foreign Equities, Core Fixed Income Dominate YTD Flows

    Trailing YTD Net Asset Flows across Factset Segment (AUM, $ Billions)

     

    Source: LPL Research, Factset, 2/27/26
    Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

    Key Tactical Asset Allocation Takeaways

    When comparing the latest LPL Research Strategic and Tactical Asset Allocation Committee (STAAC) views with the February flows data, there are a number of similarities. The STAAC continues to like the top asset class by assets and YTD flows, U.S. large caps. The STAAC maintains an overweight to large/mid cap equities over small, with a tilt towards large/mid growth over small value. Large/mid growth equities continue to benefit from strong technology-driven earnings, helping justify lofty valuations; however, recent underperformance and negative technicals have led to a slightly more negative bias on the asset class. Regionally, the STAAC has been warming up to the second highest segment by flows YTD, emerging market equities, on improving fundamentals and technicals, but remain neutral from a geographic perspective between U.S, developed international, and emerging markets.

    Within fixed income, the STAAC prefers core bond sectors over spread sectors as historically tight spreads make the relative risk-return profile of spread sectors less attractive. Outside of traditional stocks and bonds, the STAAC maintains an allocation to alternative investments, specifically in global macro and multi-strategy funds. From a sector perspective, the STAAC is overweight the communication services sector, which ranked in the middle by sector inflows YTD. The growth outlook in communication services remains solid and valuations are reasonable, although technical analysis conditions have softened leading to a negative bias on the sector.

    The information presented is for educational and informational purposes only and is not intended as a recommendation or specific advice. Cryptocurrency and cryptocurrency-related products can be volatile, are highly speculative and involve significant risks including: liquidity, pricing, regulatory, cybersecurity risk, and loss of principal. A cryptocurrency fund may trade at a significant premium to Net Asset Value (NAV). Cryptocurrencies are not legal tender and are not government backed. Cryptocurrencies are non-traditional investments, resulting in a different tax treatment than currency.  Federal, state or foreign governments may restrict the use and exchange of cryptocurrency. The use and exchange of cryptocurrency may also be restricted or halted permanently as regulatory developments continue, and regulations are subject to change at any time. Cryptocurrency exchanges may stop operating or permanently shut down due to fraud, technical glitches, hackers, malware, or bankruptcy.

    Important 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. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

    Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

    Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

    This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

    Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. 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.

    Asset Class Disclosures –

    International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

    Bonds are subject to market and interest rate risk if sold prior to maturity.

    Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

    Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.

    Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

    Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

    High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

    Precious metal investing involves greater fluctuation and potential for losses.

    The fast price swings of commodities will result in significant volatility in an investor’s holdings.

    This research material has been prepared by LPL Financial LLC.

    Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value

    For Public Use – Tracking: #1072278