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LPL Research
Last Updated: May 29, 2026

LPL Research provides its Weekly Market Performance for the week of May 25, 2026. U.S. stocks extended their recent momentum during the holiday‑shortened week with the S&P 500 notching fresh record highs and a ninth consecutive weekly gain. Investor sentiment remained anchored in optimism around the artificial intelligence (AI) theme and a potential truce between the U.S. and Iran, while falling oil prices and weaker bond yields were also supportive. Europe and Asia also broadly found traction on the same dynamics, amid local headlines. Meanwhile, commodities broadly declined as crude fell sharply with a U.S.-Iran agreement seemingly in the works, while gold moved higher.

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 5/29/26 @2:57 p.m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

U.S. Equities: An abbreviated trading week didn’t slow stocks down in extending their recent record-breaking run for another week. The S&P 500 posted multiple record highs over the last four days en route to a ninth straight weekly gain, and back-to-back monthly gains, as all roads continued to lead back to AI and the Strait of Hormuz. Following the Memorial Day holiday, a quick bout of strikes in the Middle East were brushed off by markets and chalked up to be an “escalate-to-deescalate” tactic, leaving peace deal optimism front and center to power gains. Also, as a result of an expected deal between Washington and Tehran, easing crude prices and reprieve for Treasury yields were flagged as supportive for equities, in addition to cooler-than-expected inflation data.

Elsewhere, tech names faced some fairly choppy trading but persevered to gain ground on the week. The AI optimism narrative remained fully intact; however, the momentum trades that have powered the space higher in recent months showed some signs of taking a breather Wednesday before quickly bouncing back in the following session. A market cap milestone for South Korean chipmaker SK Hynix also lifted enthusiasm, while on the earnings front, shares of computer-maker Dell (DELL) spiked on a much stronger-than-expected sales outlook fueled by demand for AI servers.

International Equities: Across the pond, European stocks managed to cling to a weekly advance on the back of Friday’s gain after reversing week-to-date gains just one day prior. Contributing to the late-week volatility was a brief bounce in energy prices and a warning from European Central Bank (ECB) Chief Economist Philip Lane around persistent war-driven inflation impacts. Nonetheless, a drop in oil prices over the course of the week broadly boosted risk appetite for the energy-sensitive region, with cooler-than-expected inflation data for Germany, France, and Spain helping seal gains to close the week.

Major Asian exchanges ended mostly higher, with tech-heavy markets driving regional gains. South Korea’s KOSPI extended its string of outperformance with an 8% rally, surpassing the 8,000-point mark on the back of semiconductor shares as chipmaker SK Hynix breached the $1 trillion market cap landmark. Taiwan also gained ground on tech strength, while greater China ended mixed after fairly choppy trading. Chinese companies were supported by expectations that tighter capital controls may boost equity flows, housing market reform plans, and enthusiasm around chipmaker Huawei’s plans for innovative improvements. But the upside was countered by effects of the cross-border brokerage crackdown beginning to be felt and e-commerce shares in Hong Kong facing pressure amid intensifying competition. Japan also delivered strong gains on tech shares and U.S.-Iran peace deal hopes.

Fixed Income, Currency, and Commodity Markets

Fixed Income: Core bonds, as measured by the Bloomberg Aggregate Index, traded higher over the holiday-shortened week, paring back losses since the start of the Iran conflict that have pushed the 10-year Treasury yield higher by roughly 50 basis points (0.50%) and the 2-year yield higher by around 60 basis points (0.60%). The move higher is a combination of rising inflation expectations, higher term premia, and a repricing higher in monetary policy rate expectations. Currently, markets are pricing in roughly a 60% chance of a rate hike this year, with a full hike priced by April 2027 — a dramatic reversal from the rate-cut narrative that dominated early 2026. As well, the market’s implied neutral fed funds rate has been marked up near 4%, suggesting investors no longer believe this cycle ends at 2.5–3.0%, with market pricing closer to central bank hawks than even median expectations.

Importantly, long-run inflation expectations remain anchored. Market-implied breakevens have not broken out in a way that signals a loss of Federal Reserve (Fed) credibility, which is a key reason we believe the Fed can remain on hold rather than be forced to hike rates. Unlike in 2022, when the Fed was clearly behind the curve and chasing rising inflation expectations, markets now appear to be looking through near-term price pressures. That said, macro data has generally come in better than expected, and this week’s $183 billion in Treasury sales — while not strong — were not particularly weak either, suggesting investors are generally comfortable with current yield levels.

Bottom Line: The market has priced in a rate hike, reset the neutral rate, and is demanding a meaningful term premium, all without inflation expectations coming unanchored or the data rolling over. In our view, a lot of the bad news is already priced into the Treasury market, and we think the bar for a hike is much higher than what markets are currently implying.

Commodities and Currencies: The broader commodity complex declined this week. To no one’s surprise, crude oil prices remained in the spotlight, with West Texas Intermediate (WTI) trading over 10% into the red with a peace deal between Washington and Tehran seemingly in the making. While tighter global supplies from a historic supply shock will linger, worries of tighter supply for longer began to be priced out of futures curves. Hopes of the Strait of Hormuz re-opening soon places WTI on pace for a meaningful monthly decline of over 10%. Elsewhere, gold prices moved higher as expectations of a Fed rate hike ebbed slightly on hopes of a U.S.-Iran truce, continuing to behave somewhat contrary to its safe haven status by moving in the opposite direction of oil. Nonetheless, the yellow metal remained on track for a monthly loss, while silver prices steadied this week to remain on pace for a gain in May. In currencies, the U.S. dollar paced a monthly rise despite weakening over the last five days as the euro and British pound strengthened.

Economic Weekly Roundup

Highlights from the April Personal Income and Spending Report:

• First quarter (Q1) economic growth was revised down to 1.6% annualized from 2.0% as services spending rose less than originally estimated, but nondurable and durable goods spending was revised higher. Business investment in equipment and further spending in intellectual property is driving this economy and will continue to do so.
• Shipments of non-defense capital goods ex aircraft in April rose 0.4% after rising 1.3% in March. The race to build out AI-related infrastructure will likely continue throughout this year, supporting growth.
• The number of individuals applying for unemployment insurance benefits last week remained low, indicating the labor market is stable despite a falling hiring rate.
• Core inflation rose 0.2%, but we expect an acceleration next month as more inflation pressures seep into durable goods prices.

Bottom Line: Despite the downward revision to Q1 growth, we expect business spending will keep contributing to growth in the near term. Regarding the inflationary environment, supply constraints will cause inflation pressures to seep into both nondurable and durable goods most likely for the next few months. Core services ex housing inflation rose a mere 0.1%. But beware of the modest rise in those “supercore” metrics in April because of the one-off decline in financial services fees.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: S&P Global U.S. Manufacturing PMI (May final), ISM Manufacturing Index (May), Construction Spending (Apr)
• Tuesday: JOLTS Jobs Opening (Apr), Wards Total Vehicle Sales (May)
• Wednesday: MBA Mortgage Applications (May 29), ADP Employment Change (May), S&P Global U.S. Services and Composite PMIs (May final), Factory Orders (Apr), ISM Services Index (May), Durable Goods Orders (April final), Capital Goods Orders and Shipments (April final), Fed Beige Book release
• Thursday: Challenger Job Cuts (May), Nonfarm Productivity (1Q final), Unit Labor Costs (1Q final), Initial Jobless Claims (May 30), Continuing Claims (May 23)
• Friday: Change in Nonfarm, Private, and Manufacturing Payrolls (May), Average Hourly Earnings (May), Average Weekly Hours All Employees (May), Unemployment Rate (May), Labor Force Participation Rate (May), Underemployment Rate (May), Consumer Credit (Apr)

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: #1117155

Technical Take on the Record-High Rally

Adam Turnquist | Chief Technical Strategist
Last Updated: May 28, 2026

Risk appetite remains firmly intact as optimism surrounding a potential resolution to the war with Iran continues to improve investor sentiment. The S&P 500 has now advanced for eight consecutive weeks, with price action remaining remarkably resilient throughout the recovery. Since bottoming on March 30, the index has gained roughly 18% over just 39 trading sessions, producing an average daily gain of more than 0.8% while experiencing a maximum drawdown of only 1.2% during the advance. While easing geopolitical tensions and an ongoing ceasefire framework have provided a major catalyst for the rally, strong corporate earnings have also played a critical role in sustaining momentum.

According to LPL Chief Equity Strategist Jeffrey Buchbinder, first-quarter S&P 500 earnings growth is currently tracking near 28% year over year. The Magnificent Seven accounted for more than 15 percentage points of that growth, though the remaining “S&P 493” are still expected to deliver earnings growth near 20%, highlighting that underlying fundamentals outside of mega cap technology remain healthy.

From a technical perspective, the S&P 500 regained momentum quickly after gapping above its 200-day moving average (dma) in April and has since moved decisively to new record highs above the 7,000-point milestone. Momentum indicators continue to confirm the bullish trend, although several measures are now approaching short-term overbought territory following the magnitude and speed of the advance.

Market breadth, however, remains a more cautious part of the recovery story. Breadth indicators have diverged from price action over the last month, suggesting participation beneath the surface has not fully kept pace with the index-level rally. Currently, only about 60% of S&P 500 constituents are trading above their 200-dma, below the historical average of roughly 73% typically seen when the index is making new highs. Still, narrow breadth has not prevented this large cap-led bull market from extending higher, as periods of concentrated leadership have often been followed by broader sector and style rotations once mega cap momentum begins to cool.

A similar pattern unfolded last year when large cap technology stocks led the market sharply higher off the April lows before eventually consolidating as leadership broadened into value stocks, small caps, and other cyclical areas of the market last fall. The current environment appears to be following a comparable script, with mega cap technology and semiconductor-related names once again carrying much of the market through major resistance levels.

Technology leadership remains exceptionally strong, with the sector continuing to reach new highs on both an absolute and relative basis. However, increasingly stretched momentum conditions and elevated positioning suggest the rally may be becoming more vulnerable to short-term consolidation. Semiconductor and memory-related stocks have experienced parabolic advances since the March lows, with several momentum indicators reaching historically elevated levels. While overbought conditions alone are not necessarily bearish, the probability of near-term profit taking or rotational activity appears to be rising as investor positioning becomes increasingly crowded.

Records on Repeat for the Broader Market

Source: LPL Research, Bloomberg 05/27/26
Disclosures: Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested in directly.

Internal Outperformance

Another way to assess participation is to analyze how many stocks are outperforming the broader index. As the rotation from last fall gained traction into 2026, just over two-thirds of S&P 500 constituents were outperforming the index on the year in mid-February. Historically, that level has represented the upper end of participation breadth over the last two decades in our dataset.

Since then, leadership has rotated back toward growth and big tech, driving the percentage of stocks outperforming the index down to roughly 33% earlier this month. That level is approaching a historically narrow participation extreme, which has often preceded broader market rotations. In fact, following the previous seven instances where internal outperformance reached similarly depressed levels, large cap value and small cap stocks outperformed both large cap growth and the broader S&P 500 over the subsequent one-, three-, and six-month periods.

Historically Narrow Leadership May Be Setting the Stage for Rotation

Source: LPL Research, FactSet 05/26/26
Disclosures: Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested in directly.

Conclusion

The S&P 500 continues to exhibit strong momentum, supported by growing optimism surrounding a resolution to the conflict with Iran and the eventual reopening of the Strait of Hormuz. Corporate earnings have provided another important tailwind, particularly within large cap technology, where strong results continue to reinforce the longer-term artificial intelligence growth narrative. At the same time, increasingly stretched momentum conditions are beginning to emerge following the market’s largely one-way advance, especially across semiconductor and memory-related stocks that have experienced parabolic moves higher in recent months.

Investor sentiment and positioning within the technology space have also become increasingly crowded from a contrarian perspective, leaving us somewhat cautious over the near term as the probability of consolidation or a pullback appears elevated. Longer term, we remain constructive on the secular bull market backdrop but recognize market advances rarely unfold in such a linear fashion. In addition, historically low levels of internal outperformance continue to suggest the potential for a broader rotation away from concentrated large cap growth leadership and into other areas of the market.

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: #1115500

AI’s New Frontier: The Transformation of Investment-Grade Credit

May 26, 2026 | Lawrence Gillum

The artificial intelligence (AI) boom has transitioned from an equity market narrative to a defining force in fixed income. Hyperscalers (Amazon (AMZN), Alphabet (GOOG/L), Meta (META), Microsoft (MSFT), and Oracle (ORCL)) are shifting from internal cash flows to substantial bond issuance to fund massive data center, graphics processing unit (GPU), and power infrastructure buildouts. This marks a structural change in investment-grade (IG) credit supply, with important implications for duration, spreads, sector composition, and portfolio construction.

In 2025, the five major hyperscalers issued approximately $121 billion in U.S. corporate bonds, more than four times their 2020–2024 annual average of $28 billion. Early 2026 data show continued momentum, with projections for hyperscaler net supply rising 30–50% to $130–150 billion. Overall U.S. IG gross issuance is forecast to hit record levels between $1.8 trillion and $2.25 trillion, with AI-related deals representing a material share. Tech’s weighting in major IG benchmarks has already increased and now accounts for around 10% of the Bloomberg Corporate Bond Index, which is up from 9% in 2024.

This issuance is notably long dated, reflecting the multi-decade useful life of data centers and associated infrastructure. Wall Street estimates center on $300 billion in AI-related IG supply for 2026, potentially delivering $360 billion in 10-year duration equivalents. The result is incremental duration added to portfolios at a time when many investors already grapple with term premium dynamics and a potentially steepening yield curve.

From a credit perspective, the story remains fundamentally constructive. Hyperscalers maintain solid balance sheets, with post-issuance leverage often in the 0.4–0.7x range versus the IG average of near 3x. New-issue concessions have averaged around 12 basis points — wider than the broader market’s ~2.5 basis points — yet deals remain heavily oversubscribed, often 4x or more (meaning for every $1 of debt issuance, there has been $4 of demand). However, despite steady demand, credit spreads (the additional compensation above Treasury securities) have widened for the tech sector relative to the broader IG corporate bond index on issuance concerns. After largely trading in concert with the index, the tech sector has underperformed lately right as issuance started to pick up.

Tech Spreads Have Widened Relative to the Index on Issuance Concerns

Source: LPL Research, Bloomberg 05/26/26
Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

That said, technical pressures are evident. Surging supply amid tight spreads risks modest widening, particularly if merger and acquisition (M&A) activity rebounds or refinancing waves coincide. Concentration risk is rising — the broader tech sector could exceed 12% of benchmarks (currently 10%), introducing greater equity-like correlation during periods of AI hype cycles or regulatory scrutiny.

The AI debt wave underscores a broader truth: innovation-driven capital expenditures (capex) are no longer confined to equity balance sheets. It is actively reshaping the IG universe, creating both challenges and compelling opportunities for those equipped to navigate the dispersion. While tech sector concentration within the broader corporate bond market will likely continue to rise, it is important to note that corporate bonds still represent only 24% of the Bloomberg Aggregate Bond Index. As such, tech concentration risk remains relatively modest within the broader fixed income market (less than 2.5%). And, with spreads still at historically low levels and total yields above long-term averages, the current environment favors income-oriented investors who can largely buy and hold bonds while harvesting coupon payments.

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: #1114528

May 22, 2026 | LPL Research

LPL Research provides its Weekly Market Performance for the week of May 18, 2026.

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 5/22/26 @3:15 p.m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

Global equity markets finished the week higher after rebounding from early declines, supported by easing geopolitical tensions, lower interest rates, and another solid round of corporate earnings. International developed markets outperformed, with the MSCI EAFE Index gaining more than 2%, while emerging markets advanced over 1.5%. The S&P 500 rose 1%, extending its winning streak to eight consecutive weeks, its longest stretch of weekly gains since 2023.

Investor sentiment improved as optimism surrounding a potential agreement between the U.S. and Iran helped reduce geopolitical concerns. Reports indicating progress on the latest peace proposal, combined with a pullback in both Treasury yields and oil prices, provided additional support for broader risk assets.

On the policy front, Kevin Warsh was officially sworn in as the new Chair of the Federal Reserve (Fed) on Friday. Warsh takes over an increasingly divided Fed, with minutes from the April Federal Open Market Committee meeting revealing a more hawkish tone among policymakers. The minutes showed that “many” participants favored removing the easing bias from the Fed’s policy statement as inflation risks remain elevated.

U.S. Equities: Momentum continued this week for U.S. equities, with the S&P 500 finishing the week back near record-high territory. Buying pressure was broad, as advancing shares on the index outpaced decliners by around 3:1. Small caps outperformed, with the Russell 2000 rallying nearly 3% and finishing the week just below its early May high. Hope for a continued path toward deescalation with Iran, stabilizing interest rates, and continued earnings strength supported risk appetite. S&P 500 earnings growth is tracking near 30% for the first quarter, materially ahead of expectations entering reporting season. Performance has once again been heavily influenced by mega-caps. The “Magnificent Seven” delivered earnings growth of roughly 63% during the quarter, accounting for more than half of the S&P 500’s total earnings growth. Still, strength beneath the surface has been better than many appreciate, with the remaining S&P 493 generating a solid 17% earnings growth rate this quarter, according to FactSet.

NVIDIA (NVDA) remained a primary market focus after delivering another strong beat-and-raise quarter, with management highlighting “parabolic” demand tied to AI infrastructure spending. The results reinforced confidence in the secular AI growth theme that continues to drive leadership within large-cap technology.

Retail earnings also drew attention this week following results from Walmart (WMT) and Target (TGT), where management commentary pointed to growing concerns around the durability of lower-income consumer spending trends.

International Equities: International equity markets moved higher this week, led by developed markets as easing geopolitical concerns and lower global interest rates supported risk sentiment. The MSCI EAFE Index gained roughly 2.5% amid growing optimism surrounding a potential Middle East peace agreement. In Europe, the STOXX Europe 600 posted gains in all five trading sessions and advanced 3%, while Germany’s DAX climbed nearly 4% on the back of solid earnings results and improving consumer and business confidence. Japan’s Nikkei 225 recovered from sharp losses earlier in the week to finish up 3%, supported by softer-than-expected inflation data and a decline in Japanese government bond yields. China lagged broader international markets, with the Shanghai Composite slipping 0.5% amid ongoing concerns surrounding domestic growth and uneven economic momentum.

Fixed Income, Currency, and Commodity Markets

Fixed Income: Core bonds, as measured by the Bloomberg Aggregate Index, were slightly higher on the week, with Treasury yield declines as the primary driver of returns. Investment-grade credit spreads were marginally higher on the week but remain at very low levels.

As discussed in this week’s LPL Market Signals, global bond markets have faced several headwinds since the onset of the Iran conflict. These include rising inflation expectations, higher term premia, a repricing higher in monetary policy rate expectations, and — particularly in the U.K. — an increase in political risk premia. As a result, 10-year developed market yields have risen by roughly 40–60 basis points, with U.K. gilts leading the move higher (+66 bps). In the U.S., the primary driver of higher yields has been an increase in real yields (as reflected in Treasury Inflation-Protected Securities, or TIPS), driven by a repricing of Fed rate expectations. Markets are currently pricing in approximately a 50% probability of two rate hikes over the next 12 months. This week’s FOMC meeting minutes struck a hawkish tone; however, we believe the hurdle for additional rate hikes is higher than the Fed simply maintaining its current policy stance — absent a meaningful unanchoring of inflation expectations, which we have not yet observed. As a result, real yields are now at their highest levels in decades, with the 10-year TIPS yield at 2.14% and the 30-year TIPS yield at 2.84%. TIPS are U.S. government bonds designed to preserve purchasing power, as their principal adjusts with inflation. Investors therefore earn a return tied to CPI increases plus a fixed real yield. In effect, regardless of the path of inflation, investors locking in these securities today can expect to earn approximately 2.14% and 2.84% in real terms over the next 10- and 30-year periods, respectively. For investors seeking inflation protection, current yields are elevated relative to historical levels, offering both explicit protection against inflation surprises and attractive real carry.

Commodities and Currencies: The broader commodity complex moved lower this week, pressured primarily by weakness in energy markets as geopolitical headlines surrounding Iran shifted modestly toward de-escalation. President Trump postponed planned strikes on Iran earlier in the week to allow additional diplomatic negotiations to take place. Still, uncertainty remained elevated amid reports of a proposed Iran-Oman toll arrangement through the Strait of Hormuz, Iran’s resistance to transferring enriched uranium out of the country, and renewed concerns following a strike on a United Arab Emirates nuclear facility, all of which raised questions about the durability of any potential peace agreement.

Brent crude declined roughly 5% on the week but continued to hold above key technical support near $98. Precious metals also weakened as markets increasingly priced in the possibility of a Fed rate hike later this year. Platinum and palladium underperformed in metals, while gold slipped less than 0.5%. Industrial metals were firmer overall, led by a 1.5% gain in copper as ongoing supply concerns continued to support prices.

Agricultural commodities outperformed, with corn, wheat, and soybeans each advancing more than 1%. Fertilizer shortages tied to the effective closure of the Strait of Hormuz have further tightened supply conditions across the agriculture sector, particularly during a critical period for North American crop production.

Meanwhile, the U.S. dollar finished little changed on the week and continued to diverge from rising interest rates. Structural pressures, including central bank diversification away from the dollar, shifting global monetary policy expectations, and concerns surrounding the U.S. fiscal outlook, have continued to weigh on the currency despite elevated Treasury yields.

Economic Weekly Roundup

The economic calendar was relatively light this week, with the April FOMC meeting minutes (Wednesday), University of Michigan survey data (Friday), and the official swearing in of Kevin Warsh as the new Fed Chair (Friday) highlighting the week.

According to the minutes to the FOMC’s April meeting, which was generally perceived as hawkish, FOMC “participants generally” judged that elevated inflation could require keeping the fed funds rate unchanged for longer than they had previously anticipated. Market-implied expectations for the fed funds rate at the end of 2026 were roughly unchanged following the release of the minutes. Markets have priced in one full rate hike in 2026.

Friday’s University of Michigan surveys again noted that inflation and the broader cost of living continue to be first-order concerns. The report also mentioned that “consumers appear worried that inflation will increase and proliferate beyond fuel prices, even in the long run.”

Finally, also on Friday, Warsh was sworn in and will become the 17^th Fed Chair in its history (11^th in the post 1935 Banking Act era). Warsh has noted that he wants to bring “regime change” to the central bank, including shrinking the Fed’s $6.7 trillion balance sheet, establishing a new framework for analyzing inflation, and changing how the institution communicates with the public. Most of his intentions, however, require consensus approval.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: Memorial Day Holiday, no economic releases scheduled
• Tuesday: ADP Weekly Employment Change (May 9), Chicago Fed National Activity Index (Apr), Philadelphia Fed Non-Manufacturing Activity (May), FHFA House Price Index (Mar), House Price Purchase Index (1Q), S&P Case-Shiller 20-City and National House Price Indexes (Mar), Conference Board Consumer Confidence report (May), Dallas Fed Manufacturing Activity (May)
• Wednesday: MBA Mortgage Applications (May 22), Richmond Fed Manufacturing Index and Business Conditions (May), Dallas Fed Services Activity (May)
• Thursday: Personal Income and Spending (Apr), Headline and Core PCE Price Indexes (Apr), Real Personal Spending (Apr), Durable Goods Orders (Apr preliminary), Initial Jobless Claims (May 23), Capital Goods Orders and Shipments (Apr preliminary), Continuing Claims (May 16), GDP Annualized (1Q second reading), Personal Consumption (1Q second reading), Core PCE Price Index (1Q second reading), New Home Sales (Apr), Building Permits (Apr final)
• Friday: Advance Goods Trade Balance (Apr), Retail Inventories (Apr), Wholesale Inventories (Apr preliminary), MNI Chicago PMI (May)

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: #1114245

How AI May Increase Jobs, Not Replace Them

Dr. Jeffrey Roach | Chief Economist
Last Updated: May 21, 2026

From the April payroll report released on May 8, we realize that not all industries are equally impacted by AI. Diagnostic imaging centers, an area where AI is thought to replace humans, have increased demand for workers, whereas bookkeeping demand has declined in recent years. William Jevons, a British economist born in the same town as the Beatles but less famous, explained that increased efficiencies may spark additional demand and that this concept may help us understand the potential AI impacts on the job market.

The Jevons paradox suggests that when technology makes the use of a resource more efficient, demand for that resource can rise rather than fall because lower costs unlock new uses and broader adoption. Applied to AI and the labor market, this means AI may reduce the time and cost required to perform many tasks, but that does not necessarily imply a proportional decline in labor demand. Instead, by making tasks, software development, customer service, research, and operations more productive, AI can expand the volume of work organizations are able to undertake and create demand for new roles, new products, and new business models. Or in the case of diagnostic imaging centers, as mentioned above, the lower cost of the service is a catalyst for a spike in demand, and so a firm hires more workers to meet the shift in demand.

The implication is that AI’s labor-market impact will likely be less about the wholesale elimination of jobs and more about the reallocation of tasks across workers, firms, and industries. Some routine or automatable tasks will be displaced, and certain occupations will face pressure. But as AI lowers the cost of service, demand may increase for workers who can use AI effectively, improve workflows, and apply human judgment. In this sense, AI could follow a Jevons-like pattern: greater efficiency may increase the overall demand for AI-enabled work, even as it changes the composition of employment and raises the premium on adaptability, digital fluency, and higher-value human skills. And AI may end up being the antidote to a shrinking labor force.

Percent of Working-Age Population Will Shrink

Source: LPL Research, Bureau of Labor Statistics 05/13/26

Policymakers and investors increasingly see AI as a way to offset the economic drag from aging populations, especially in developed economies where the workforce is starting to shrink. As more people move into retirement and a larger share of the population is over 70, fewer workers are available to support overall growth. AI is viewed as a way to fill that gap by boosting how much each worker can produce rather than relying on a larger workforce. It can automate repetitive tasks, enhance decision-making, and allow smaller teams to generate the same or greater output. That dynamic matters for governments as well, since slower workforce growth puts pressure on tax revenue while spending on healthcare and pensions is rising.

From an investor perspective, AI is also tied to long-term profitability in a world where labor is becoming scarcer and more expensive. Companies that adopt these technologies can reduce their dependence on hiring while improving efficiency and output, which helps protect margins. This encourages more spending on technology and capital investment as businesses look to substitute machines for labor. Over time, many investors believe AI could drive a sustained increase in productivity similar to earlier technological shifts. In that sense, it is being treated as a structural solution to demographic challenges, one that could extend the growth trajectory of aging economies while supporting returns even as population dynamics become less favorable.

AI is likely to reshape rather than simply eliminate jobs, with efficiency gains potentially increasing demand for AI-enabled work while raising the premium on adaptability and human judgment.

For more ways AI will shape the outlook for economic growth, inflation, and the job market, check out this month’s Economic Navigator.

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: #1113157

Potential Risks That Could Challenge the Strong Market Narrative

LPL Research
Last Updated: May 20, 2026

Today’s blog is written by Chris Fasciano, chief market strategist at Commonwealth. He represents Commonwealth in various media appearances, advisor speaking events, and Commonwealth conferences. He also oversees and mentors a dynamic team of investment research analysts who specialize in equity and fixed income markets. Prior to this role, Chris spent 10 years as one of the firm’s portfolio managers, involved with asset allocation and fund selection. With a deep background in small- and mid-cap stock research, Chris is uniquely positioned to analyze the latest economic data and offer valuable insights on navigating today’s volatile markets. Chris Fasciano is a guest writer and is not affiliated with LPL Financial.

One of my guiding investment philosophies is that headlines drive markets in the short term but over the long term it is fundamentals that drive markets. That has played out multiple times over the last year. There have been significant sell-offs due to tariff policy and the war in the Middle East. Yet the market rebounded not long after these declines based on an underlying strength in corporate earnings.

Rising markets make everyone feel better, but they also come with higher expectations. Today, the key question is not whether fundamentals are strong but whether the market’s consensus view is too optimistic. Currently, market participants seem to be assuming that the impact from the war will be reversed once an agreement between the U.S. and Iran is reached. Jobs creation will remain positive; inflation will moderate; the economy will continue to grow and earnings will remain strong.

Part of any good investment process is monitoring potential risks to the consensus narrative. Let’s do that now.

It Is All About Earnings

It is easy to see why investors have responded positively to earnings. S&P 500 first quarter earnings are up around 27% versus expectations at the end of March for 13.2% growth. Perhaps more importantly, second quarter earnings estimates have moved higher as well.

Estimates Moving Higher

Source: LPL Research, FactSet 05/15/26
Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not develop as predicted and are subject to change.

The “Estimates Moving Higher” chart illustrates where full year 2026 numbers have moved as a result. Since February 27, the day before the war in the Middle East began, 2026 earnings estimates have increased 6.5%. Despite all the headlines over the last few months, the surge in oil prices, and the rise in gas prices, analysts have become more optimistic about the health of corporate America. Current estimates indicate full year earnings growth of 23%!

But if earnings have been driving the market higher and expectations for future growth have increased, then the potential for disappointment has also increased. One of the most important pillars supporting this optimistic outlook is the artificial intelligence (AI) narrative.

The Artificial Intelligence Story

The buildout of AI infrastructure has both been a driver of U.S. economic growth and stock market returns. The best-performing stocks have been the large cap growth stocks most exposed to AI. They have had the best earnings growth profile, and that has led to investors continuing to invest in their stocks.

Early in the Spending Boom

Source: LPL Research, Bloomberg, J.P. Morgan Asset Management 05-15-26
Disclosures: Data 2026, 2027, and 2028 reflect consensus estimates. Capex shown is company total. Past performance is no guarantee of future results. Estimates may not develop as predicted and are subject to change. Any companies referenced are being presented as a proxy, not as a recommendation. Hyperscalers are the large cloud computing companies that own and operate data centers with horizontally linked servers that, along with cool and data storage capabilities, enable them to house and operate AI workloads.

The “Early in the Spending Boom” chart indicates that AI infrastructure capital outlays are beginning to ramp up. This trend will unfold over years and decades. As a result, the theme is likely to remain an important part of the market narrative. But once again, given the optimism surrounding the consensus view for the power of AI’s future, any changes on the margin to capital spending could lead to ripple-effect disappointments for both the economy and market. Simply pushing spending plans out a quarter or two, supply chain issues, or even higher borrowing costs, could unnerve investors and pressure AI related stocks. NVIDIA’s earnings report and conference call after the market closes this evening will be the next key data point in this story.

At the same time, macroeconomic pressures are also beginning to challenge optimistic narratives.

Inflation Is Starting To Run Hot

For the most part, the stock market has ignored rising oil prices as the ceasefire and ongoing negotiations seemed to indicate a potential end to the war in the Middle East. However, the Strait of Hormuz has now been closed for 11 weeks, removing key oil supplies for the global economy. Gas at the pump continues to move higher across the country.

Both the Consumer Price Index (CPI) and the Producer Price Index (PPI) came in higher than anticipated in the month of April. Consumer prices rose at an annual rate of 3.8%. Even more concerning was the increase in producer prices, which rose 6%. Supply chain concerns are beginning to show up in the data.

Inflation Is Beginning To Accelerate

Source: LPL Research, Bureau of Labor Statistics (BLS), FactSet, J.P. Morgan Asset Management 05/15/26
Disclosures: Past performance is no guarantee of future results. Contributions mirror the BLS methodology on page 7 of the CPI report. Values may not sum to headline CPI figures due to rounding and underlying calculations. Headline and core PCE deflator inflation shows are based on seasonally adjusted data due to data availability. Official October 2025 data unavailable due to government shutdown and data shown are J.P. Morgan Asset Management estimates.

The “Inflation Is Beginning To Accelerate” chart examines the key components that are driving consumer price inflation. We are still a long way from inflation reaching the levels seen in 2022 when the Fed reacted by raising interest rates aggressively. However, the drivers of the current increase in inflation are the same as they were back then — energy, food at home, and core goods. That isn’t surprising since the current concern is higher energy prices and supply chain constraints, which were the issues when Russia invaded Ukraine. Higher inflation in those areas could be a drag on other parts of the consumer budget. Given that consumer spending makes up 70% of U.S. economic growth, a headwind for the economy could impact profitability for companies.

Driven by concerns about accelerating inflation and where it might be headed, the yield on the 10-year Treasury bond rose substantially and now is over 4.6%. The 10-year yield is a key benchmark for mortgage rates, which also impacts the spending power of the consumer.

Moderate inflation is manageable, but higher or unpredictable inflation can lead to downward pressure on markets. No matter how well companies are doing, higher interest rates tend to lead to lower valuations for stocks. And if inflation continues to rise, rates are likely to follow. As a result, just the uncertainty about inflation alone can increase volatility even if the longer-term outlook remains anchored.

But it is important to remember that inflation doesn’t impact all companies, sectors, and stocks in the same way. While some companies will be hurt by higher inflation and interest rates, others will benefit.

Portfolio Diversification Remains Key

When markets are priced for optimism, it doesn’t take bad news, only less good news, to trigger volatility. Risk management is a key part of any investment process. Knowing what investor expectations are priced into the market and understanding what could prove them to be either optimistic or pessimistic is a worthwhile exercise to go through.

Timing markets is hard, if not impossible, so wholesale changes to portfolios based on assumptions about the future don’t make sense. As we have learned time after time, assumptions can change very quickly. But there are certainly ways to mitigate risk while preserving the opportunity to participate in further upside.

It is possible that none of the potential risks to the consensus narrative materialize, but with stocks near all-time highs, now is a good time to revisit long-term goals and determine whether your current portfolio accomplishes these goals. If not, some changes may be warranted given the strong moves in numerous asset classes that have occurred over the last year. But if investors do only one thing year in and year out, it should be to rebalance portfolios. Bringing portfolios back in line with diversified allocations should help navigate any uncertainty on the horizon.

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: #1112461

Why Most Portfolio Manager Mistakes Seem Smart at the Time

Carter France | Senior Investment Analyst
Last Updated: May 19, 2026

Most portfolio manager mistakes don’t feel reckless when they’re initially put into motion. The manager’s compelling track record and narrative over time leads to reasonable outlooks, portfolio themes, positioning, and trades. The story makes sense. Near term performance in these scenarios ranges from defensible to even impressive, and nothing appears broken yet from an outsider’s perspective.

A contrasting lens tends to be used when we view these mistakes in a backward-looking fashion. Often, lead portfolio managers and key investment professionals don’t fail because they lose skill or discipline. They fail because something subtle has changed — and no one had the time, perspective, or framework to catch it early. The mistake evolves into something that appears obvious, and the initial decision-making no longer looks smart but rather avoidable. Those early conversations that centered around opportunity have now evolved into explanations as managers find themselves playing defense.

The Problem Isn’t Bad Managers — It’s a Focus on the Symptoms Over the Root Cause

When many investors review investment strategies, performance is often the starting point. And understandably so. Returns are visible, easy to compare, and they’re typically what clients notice first when presented with a fact sheet, marketing materials, or research database.

But performance screens are backward‑looking by design. They tell you what has happened — not whether the conditions that made that performance possible still exist.

In our research, early warning signs rarely show up in returns. Instead, they surface quietly in places like:

• A shift in how decisions are made inside the firm
• Asset growth that subtly changes how a strategy is implemented
• Incentives that start favoring asset gathering over process discipline
• Risk exposures that look benign individually but could be dangerous in combination

Few of these warning signs present early, alarming symptoms. By the time symptoms reach an alarming level, the damage to 1- and 3-year-trailing performance figures is sometimes already done.

That’s why manager mistakes almost always look intelligent in real time. The inputs still appear sound. The output just hasn’t been tested yet.

What Institutional Research Thinks About Differently

One of the biggest differences between institutional manager research and individual selection is the questions being asked. Instead of asking: “Has this manager performed?” We ask: “Are the conditions we’ve identified as conducive to consistent risk-adjusted returns and excess returns still present and what could realistically go wrong?”

That shift matters.

It forces you to move beyond stories and into structure. Beyond past success and optimism and into future durability and probability.

Great past performance doesn’t fail all at once. It erodes at the edges — through capacity strain, process drift, team changes, or creeping exposure to undesirable risks.

Avoiding Mistakes Beats Chasing Stars

High‑quality manager research isn’t always about finding the next star manager before everyone else does. In a large, vast investment universe, that can be a low‑probability game with high opportunity costs.

It’s about avoiding predictable paths to failure.

Managers rarely underperform because of one big decision. They tend to underperform because a series of small changes go unchecked — each one reasonable on its own, but collectively transformative to the strategy’s risk profile.

The goal isn’t perfection but rather stacking the odds in the investor’s favor across full market cycles.

For client portfolios, that often translates to:

• Fewer surprises
• Performance that may align with expectations
• More consistency across different market environments
• And fewer uncomfortable client conversations that begin with, “This made sense at the time.”

That last one matters more than most advisors admit. From an end client’s perspective, reasonableness in hindsight and not in the present doesn’t inspire confidence in an investment professional.

Where Our Internal Coverage List Can Help

We continuously pressure‑test portfolio managers on our internal Coverage List via onsite visits and virtual interviews, not to predict exact outcomes, but to help reduce avoidable mistakes.

We focus less on trying to forecast who will outperform next year and more on understanding:

• Whether a manager’s process is still intact
• Whether firm or strategy growth has altered execution
• Whether decision-making authority is clear and stable
• Whether risk is being taken consciously or accumulating unintentionally

In a world where time is the scarcest resource, signals matter more than stories. Good narratives are easy to find. Durable processes are harder.

The internal Coverage List is designed to help advisors identify strategies that exhibit characteristics that contribute to long‑term outcomes, so portfolios don’t just look smart at the time but potentially hold up when it matters. For LPL advisors, we welcome discussions about the Coverage List. For investors, please contact your LPL advisor for details.

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: #1104517