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LPL Research
Last Updated: May 15, 2026

LPL Research provides its Weekly Market Performance for the week of May 11, 2026. U.S. equities held up well this week, with the S&P 500 posting a modest weekly gain and hitting a record high on Thursday, supported by AI-driven enthusiasm despite higher oil prices and rising Treasury yields. Macro headwinds, including rising energy costs and elevated inflation, along with limited progress on U.S.-China trade and Middle East tensions, pressured investor sentiment. International equities underperformed, weighed down by a stronger U.S. dollar, rising global rates, and profit-taking in Asia following a “sell-the-news” reaction to the Trump-Xi summit.

Fixed income markets declined as yields rose globally, driven by inflation pressures, higher oil prices, and political uncertainty, particularly in the U.K. High yield credit remains resilient but expensive, with tight spreads and improving fundamentals suggesting limited upside without a downturn.

Stock Index Performance

Index	Week-Ending	One Month	Year to Date
S&P 500	0.35%	5.72%	8.47%
Dow Jones Industrial	-0.08%	2.28%	3.13%
Nasdaq Composite	0.03%	9.32%	12.96%
Russell 2000	-2.09%	3.23%	12.87%
MSCI EAFE	-2.10%	-1.48%	5.99%
MSCI EM	-4.08%	4.77%	19.11%

S&P 500 Index Sectors

Sector	Week-Ending	One Month	Year to Date
Materials	-2.16%	-2.50%	10.02%
Utilities	-1.89%	-4.82%	2.66%
Industrials	-1.05%	0.10%	10.51%
Consumer Staples	1.31%	5.15%	11.25%
Real Estate	-2.52%	-0.52%	7.73%
Health Care	1.03%	-1.93%	-6.46%
Financials	-0.28%	-2.08%	-6.80%
Consumer Discretionary	-3.13%	0.37%	0.33%
Information Technology	1.41%	14.65%	17.27%
Communication Services	-0.86%	5.94%	11.08%
Energy	6.55%	5.89%	31.77%

Fixed Income and Commodities

Indexes and Commodities	Week-Ending	One Month	Year to Date
Bloomberg US Aggregate	-0.52%	-0.68%	-0.08%
Bloomberg Credit	-0.41%	-0.55%	0.03%
Bloomberg Munis	-0.28%	-0.15%	0.90%
Bloomberg High Yield	-0.14%	0.00%	1.23%
Oil	10.42%	15.41%	83.49%
Natural Gas	7.51%	13.56%	-19.59%
Gold	-3.50%	-5.03%	5.35%
Silver	-4.91%	-3.25%	6.61%

Source: LPL Research, Bloomberg 5/15/26 @3:54 p.m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

U.S. Equities: As trading for the week drew to a close, the S&P 500 was clinging to a modest weekly gain, setting a fresh all-time high along the way and extending its winning streak to seven weeks. Investor focus was on inflation data early in the week and the Trump-Xi summit late in the week, neither of which offered any relief for oil or the rates markets. A double-digit increase in oil and sharply higher Treasury yields weighed on trading Friday. However, enthusiasm for AI, reflected in the sharp gains in Cisco (CSCO) and NVIDIA (NVDA), the well-received Cerebras Systems (CBRS) IPO, rebounds in some leading software names, and the possibility of trade deals with China were enough to keep large cap indexes above water despite some weakness in semiconductors broadly.

Although the status quo with China was not necessarily viewed negatively by strategists, the lack of confirmed agreements on trade and lack of progress on a resolution to the U.S.-Iran conflict did contribute to a challenging week for sector laggard consumer discretionary, which continues to struggle with high oil prices. The increasingly challenging macroeconomic backdrop also pressured sentiment toward small caps, which finished solidly lower on the week and kept market chatter about a lack of breadth front and center for market-watchers. With earnings season largely over, except for chip giant NVDA on May 20 and some May quarter-end reporters in retail, market attention will be focused on the Strait of Hormuz, ongoing inflation pressures, and the leadership transition at the Fed.

International Equities: Developed international and emerging market equities lagged significantly behind the broad U.S. large cap equity market for the week. A surge in the U.S. dollar and high oil prices, which have contributed to upward pressure on interest rates globally, were the biggest drags on the non-U.S. indexes, although Asian equities were also hurt by the sharp intra-week reversal in Korean memory names.

Weakness in developed international markets was broad based with declines in France, Spain, Germany, and Italy on the European side and Australia and Japan in Asia-Pacific. Political strife in the U.K. continued to weigh on the British market, while yields on Japan’s long bond hit multi-decade highs. Weakness in Asian markets permeated through emerging markets as China, India, and Taiwan lagged the U.S. on the Asia side, in part due to profit taking as the Trump-Xi summit reaction seemed to be a sell the news event. Latin America was also weak as commodities outside of oil were mostly lower, particularly precious metals.

Fixed Income, Currency, and Commodity Markets

Fixed Income: Core bonds, as measured by the Bloomberg Aggregate Index, declined over the week. The rise in U.S. Treasury yields this week was driven by higher oil prices, firmer inflation readings in the U.S., and the spillover effects from the broader global bond sell-off — most notably in the U.K. In the U.K., intensifying inflationary pressures, combined with increased political uncertainty surrounding Prime Minister Keir Starmer’s leadership, pushed 30-year gilt yields to their highest levels since 1998.

The high yield market also traded lower over the last five days, which remains broadly sanguine yet sensitive to an evolving risk landscape, as the conflict in the Middle East persists, and domestic consumer pressures mount. Per Bloomberg, approximately $41 billion in market value was trading at spreads wider than 1,000 basis points across the high yield index as of May 5, down from $50 billion at the end of February. As such, nearly a quarter of the index’s option-adjusted spread (OAS) is attributable to the widest 5% of issuers by market value. At current levels, OAS are in the third percentile of historical spread valuations (meaning spreads have been higher 97% of the time since 2001). Removing the weakest credits suggests that valuations are even more expensive.

That said, corporate default rates are declining, distressed exchanges are easing, and the number of liability management exercises is falling, indicating improving quality within the broader high yield market. Additionally, the quality of the index has improved in recent years, with BB-rated securities now representing a record-high share of over 56%. As a result, absent an economic contraction (which is not our base case), spreads can remain at these very tight levels; however, we believe the likelihood of further tightening is low. Overall, the additional compensation for owning higher-risk corporate credit is unattractive, in our view.

Commodities and Currencies: The broader commodities complex rose this week on the back of double-digit gains in crude oil prices. WTI crude settled at $105.42 (+4.2% Friday) and Brent closed just shy of $110 as the Trump-Xi summit yielded no progress on reopening the Strait of Hormuz. Trump said he didn’t press Xi on Iran, though both agreed the waterway “must remain open.” While oil was the weekly winner, precious metals finished at the opposite end of the commodities leaderboard. Gold was hurt by a surging U.S. dollar and a more hawkish market outlook for monetary policy that increased the relative attractiveness of bonds relative to gold. A volatile week has left silver prices down as well. Industrial metals held up well as AI investment continued to support copper globally.

The U.S. dollar strengthened this week, with the Bloomberg Dollar Spot Index up 1.2% for its best week since early March. Repricing for a more hawkish Fed and safe haven buying amid heightened geopolitical uncertainty were among key drivers for the greenback which broke back above its 50- and 200-day moving averages. The yen remained in focus, weakening for five straight sessions toward 159. USD/JPY approached levels last seen before the April 30 intervention.

Economic Weekly Roundup

Medical Care Drove Consumer Inflation. April inflation rose 0.6% month over month, pulling the annual pace up to 3.8% from 3.3% in March. The reacceleration was expected, so investors need to focus more on services to get a bead on the overall trajectory. The so-called “Supercore” (which focuses on services ex housing) accelerated to 3.4% from a year ago from rising medical care services. This pace will likely continue as demand for health care increases as the population ages.

The Fed will almost certainly be on hold for the next two quarters as rates remain elevated since inflation is not expected to ease in the same way investors anticipated just a few months ago.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: New York Fed Services Business Activity (May), NAHB Housing Market Index (May), Total Net TIC Flows (Mar), Net Long-term TIC Flows (Mar)
• Tuesday: ADP Weekly Employment Change (May 2), Pending Home Sales (Apr)
• Wednesday: MBA Mortgage Applications (May 15), FOMC Meeting Minutes (Apr 29)
• Thursday: Initial Jobless Claims (May 16), Continuing Claims (May 9), Philadelphia Fed Business Outlook (May), Housing Starts (Apr), Building Permits (Apr preliminary), S&P Global U.S. Manufacturing, Services, and Composite PMIs (May preliminary), Kansas City Fed Manufacturing Activity (May)
• Friday: University of Michigan Consumer Sentiment Report (May final), Kansas City Fed Services Activity (May), Bloomberg U.S. Economic Survey (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: #1105276

Tactical Update: Rising Conviction on Earnings Growth

George Smith | Portfolio Strategist
Last Updated: May 14, 2026

Rising Conviction on Earnings Growth

In last month’s update, we highlighted a shift from preparation to action as market conditions began to support increased equity exposure. Since then, that positioning has become even more grounded in fundamentals, as earnings have demonstrated strong growth. The improved backdrop also reflects an economy that continues to grow at a solid pace and a market that has remained resilient through recent geopolitical uncertainty.

The LPL Research Strategic and Tactical Asset Allocation Committee (STAAC) recently upgraded equities to overweight (by adding to small cap value), while trimming fixed income to underweight (via a reduction in mortgage-backed securities). That move reflects growing confidence in both the economic backdrop and the earnings outlook. Equity market leadership has remained concentrated in growth and large cap stocks, particularly within the technology sector, where continued investment in artificial intelligence (AI) is driving strong earnings trends. This leadership also reflects the scale of AI-related investment, which is disproportionately benefiting large cap companies with the balance sheet strength to fund that growth.

This earnings season has helped validate that view. As shown in the LPL Research Earnings Season Dashboard below, first quarter results have come in notably strong. Earnings growth is tracking at a torrid pace; a high percentage of companies are beating both earnings and revenue expectations, and forward estimates continue to move higher even late in the reporting cycle. Much of that strength is coming from the largest technology companies (the Magnificent Seven (Mag Seven) stocks have seen an average 57% earnings per share growth in Q1), but the overall tone of the season has been constructive. The average overall S&P 500 upside surprise has been strong, supported by communications services, consumer discretionary sectors, and semiconductors, while both earnings and revenue beat rates are running well above average. Forward estimates have also continued to rise in recent weeks, reflecting resilient demand and continued investment trends.

Earnings Season Dashboard

Statistics	As of May 8, 2026
# of companies that have reported	447
% of companies beating earnings	84
% of companies beating revenues	79
Q1 26 earnings growth	26.8%
Q1 26 revenue growth	11.0%
Trailing earnings	$288.74
Change in trailing earnings	$0.32
Q1 26 earnings	$79.57
Change in Q1 26 earnings	$0.38
Forward earnings	$342.27
Change in forward earnings	$0.20

Source LPL Research, FactSet 05/08/26
Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

One of the most important dynamics in equity markets this year has been the relationship between prices and earnings. While the S&P 500 price has moved higher, earnings expectations (as measured by forward earnings per share (EPS)), have increased at a faster rate. The result is a modest decline in valuation multiples (as measured by the forward price to earnings (P/E) ratio, leaving the market somewhat “cheaper” today on a forward basis than it was at the start of the year. That is not something typically experienced during an equity rally to new all-time highs.

Year-To-Date Change in S&P 500 Price, Earnings, and Valuation

EPS = Earnings Per Share, P/E = Price to Earnings Ratio
Source LPL Research, Goldman Sachs GIR, FactSet 05/13/26
Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

At the same time, it must be considered that earnings strength has been relatively concentrated, with a narrow group of companies driving both earnings revisions and market performance. That type of setup can lead to periods of volatility, particularly in momentum-oriented areas of the market, as leadership rotates beneath the surface.

Current Tactical Positioning

The STAAC’s recommended tactical asset allocation (TAA) includes an overweight stance toward U.S. equities. With a path to reduced geopolitical risk emerging and a supportive earnings backdrop, we expect equities to continue to find support. The STAAC maintains a preference for growth over value and slightly favors large caps over small caps, reflecting both earnings leadership and balance sheet strength. Continued investment in AI also reinforces that bias.

Fixed income remains less compelling in the near term, as yields are expected to remain rangebound and persistent inflation pressures may delay the timing of Federal Reserve rate cuts. In that environment, the return potential for bonds may be more limited relative to equities. At the same time, with economic and policy uncertainty likely to persist, we believe alternative investments can continue to play a role in helping manage portfolio volatility and improving diversification.

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: #1108759

Beyond Returns: Three Powerful Factors in Active Fund Evaluation

Derek Beiter | Senior Investment Analyst
Last Updated: May 13, 2026

A common approach by investors is to invest in funds that have historically outperformed their benchmark index, hoping that a fund’s past outperformance will continue. Our research finds this approach can often work — until it doesn’t. We see a persistence effect in fund performance data, whereby funds with strong three-year performance often have another three-years of good performance in the following period. But when the relationship breaks down, it is often painful. Our resaerch indiciates the prior winners tend to become losers around big inflection points in the market, such as the 2008 Global Financial Crisis and the 2022 sell-off for stocks and bonds induced by rising interest rates.

We believe investors should consider a fund’s past performance as an important criterion. We also believe it is important to review factors outside of performance, not because performance doesn’t matter, but because certain non-performance factors have been shown to correlate with future performance. In other words, investors may benefit from expanding their criteria beyond performance. Here, we highlight three non-performance indicators supported by academic literature: fund expenses, team-based management, and ownership of fund shares by portfolio managers (PMs).

Fund Expenses

• The evidence. There is generally broad agreement among peer-reviewed academic literature that funds with lower fees generally have better performance. A somewhat recent example comes from Michael J. Cooper, Michael Halling, and Wenhao Yang (2021), who found “a strong negative association between net-of-fee fund performance and fees in a sample of all US and international equity funds.”¹
• On your own. You can find a fund’s fees and expenses in its prospectus document and can compare them to other funds in its asset class using third-party data providers.
• Go further with LPL Research. We assess fund expenses as one factor in our 40-factor evaluation framework. Funds with expenses below the average for their investment category generally receive a green status in our framework. When fees are above average, we prefer to see this offset by strong net-of-fee performance and a reasonable explanation for the higher fee (such as higher costs of resources and data in complex assets). We also evaluate trading costs, such as explicit trading commissions and, for exchange-traded funds (ETFs), implicit costs such as the bid-ask spreads and premiums or discounts to net asset value (NAV).

Team-Based Management

• The evidence. Saurin Patel and Sergei Sarkissian published a paper in 2017 that found that team-based funds generally perform better than funds with a single manager.² They also found that having too many PMs on a fund is associated with underperformance.
• On your own. You can find the names and basic biographic information about a fund’s PMs in its prospectus.
• Go further with LPL Research. Our Investment Manager Research team speaks with PMs on an ongoing basis. Sometimes we uncover nuances, such as key investment professionals who are not listed in the prospectus but still have important roles on the investment team. We also find situations where someone is listed in the prospectus as a PM who does not make day-to-day investment decisions for the fund, but rather provides an oversight function. Through our conversations with PMs and other key staff, we develop an opinion of the key contributors to a fund’s success, and we stand ready to adjust our opinion of the fund when key people depart. We also attempt to understand the communication dynamics on an investment team, as healthy two-way dialog about portfolio decisions may be helpful to performance.

Ownership of Fund Shares by PMs

• The evidence. An article by Khorana, Servaes, and Wedge (2007), as well as more recent studies, find that funds whose PMs invest their personal assets alongside investors tend to have better performance.³  Some observers believe this comes from managers having “skin in the game,” because they do better financially when the fund succeeds.
• On your own. You can find the PM’s ownership of fund shares in a fund’s Statement of Additional Information (SAI), which is typically available on the fund company’s website. Within the document, searching for the PM’s last name may help you find the relevant section among this lengthy document.
• Go further with LPL Research. We assess PM ownership as part of our 40-factor evaluation process. High ownership of fund shares tends to receive a green indicator in our framework, while little to no ownership tends to receive a yellow or orange indicator. If a fund manager does not own shares in the fund they manage, we typically inquire with the manager about this and determine whether the explanation addresses our concerns. For example, the PM may be aligned with shareholder interests in other important ways, such as through a well-designed performance-based compensation plan or investments in similarly managed portfolios.

Final Thoughts

We believe it is important for investors to consider a fund’s past performance and factors beyond performance. The importance of fund expenses, team structure and dynamics, and PM ownership of fund shares are well-supported by academic literature and our internal research. While investors can find relevant information in fund documents, our Investment Manager Research team dives much deeper. We do this by considering implicit as well as explicit costs, regularly speaking with PMs, and understanding how they are incentivized. We believe these are important aspects of our overall, holistic 40-factor evaluation framework for actively managed portfolios.

Footnotes

1. Michael J Cooper, Michael Halling, and Wenhao Yang, 2021. “The Persistence of Fee Dispersion among Mutual Funds.” Review of Finance, European Finance Association, vol. 25(2), pages 365-402.
2. Saurin Patel and Sergei Sarkissian, 2017. “To Group or Not to Group? Evidence from Mutual Fund Databases.” Journal of Financial and Quantitative Analysis, vol. 52(5), pages 1989-2021.
3. Ajay Khorana, Henri Servaes, and Lei Wedge, 2007. “Portfolio Manager Ownership and Fund Performance.” Journal of Financial Economics, vol. 85, pages 179-204.

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: #1105267

Using the Late 90s as a Comp, the AI Boom Still Has Legs

Jeff Buchbinder | Chief Equity Strategist
Last Updated: May 12, 2026

Many have drawn the comparison between the current AI buildout with the dotcom period in the late 1990s, when the infrastructure for the internet was built. It’s a sensible comparison to make because of the massive amount of capital deployed to commercialize the buildout of revolutionary and life-changing technology. It’s also a reasonable comparison to make because technology stocks drove one of the biggest stock market rallies in history more than 25 years ago, and some are using similar language today when discussing the potential (and we underscore potential) of AI and bidding up the valuations of AI companies poised to benefit.

Pros and Cons of the 1990s Comparison

While we don’t think this is a great comparison for a number of reasons — which we cover below — it is interesting to line up the path of the tech-heavy Nasdaq-100 Index from the start of the AI era, which we mark at the launch of ChatGPT, to the birth of the modern internet, i.e., the launch of the first browser, Netscape (later acquired by AOL). As illustrated in the “Based on the Dotcom Era Comparison, the AI Bull Market Seems Fairly Reserved” chart, the Nasdaq-100 advance in recent years is more gradual than that of the advance over a similar four-year time frame. Based on this comparison, the current bull market — nearly four years old — still may have plenty of life left in it. The Nasdaq-100 is up more than 140% since ChatGPT was launched, while the index gained over 1090% from when Netscape was first released until the peak of the dotcom bubble in March 2000.

We’re not saying history will repeat and that the Nasdaq 100 will be up another 900% before crashing. We are simply making the point that the current stock market trajectory is more rational than you might think, and this may be more like 1997 than late 1999 or early 2000.

Based on the Dotcom Era Comparison, the AI Bull Market Seems Fairly Reserved

Source: LPL Research, FactSet 05/11/26 (Data series normalized to 100 on 12/15/94 and 11/30/22)
Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

Reasons This Time is Different

We admit these are dangerous words in investing. But when comparing historical periods, every time is different. Despite the similarities between dotcom and AI from a financial market perspective, there are more differences. Some of them include:

• Stronger leadership. The leaders are funding the AI buildout mostly with internal cash flow and not speculative capital raising. Their business models are much more diversified than the website-oriented business models of the dotcom era, and their balance sheets are much stronger than the fiber optic equipment makers of the late 1990s. Some AI sub-segments may be showing some dotcom-like behavior, but that’s not where public market leadership is.
• Grounded valuations. In March 2000, the technology sector peaked at a valuation of 58 times consensus forward earnings, compared to 25 today. During the dotcom era, eyeballs and clicks were oft-cited valuation measures. Today is about earnings, revenue, and cash flows.
• More rational IPOs. The technology IPOs are much larger today, with proven business models and sizable revenue streams. Even for companies operating at a loss today, it’s much easier to see a path to profitability.
• AI is early in its cycle. Today, the buildout is centered around AI infrastructure, while the AI adoption phase has barely begun. During dotcom, the frothy period of the cycle featured consumer websites that could never be sufficiently monetized even after the infrastructure was in place. Today, we don’t know who the AI adoption winners will be. The strong balance sheets of the infrastructure builders are a good start, paving the way for many AI adoption winners to materialize in the future.

Summary

There are clear similarities between the AI bull market cycle and the dotcom boom of the late 1990s. Technology stocks provided stock market leadership; valuations were elevated; there were segments of market speculation; and technology advances were life changing. But in terms of what companies are leading the current technology revolution, how the stock market is valuing them, how much speculation is taking place, and what stage of the cycle we’re in, we see important distinctions.

Bottom line, we think this bull market still has a way to go and expect the technology sector to lead. LPL’s Strategic and Tactical Asset Allocation Committee (STAAC) maintains an overweight stance on the technology sector, as well as industrials, both positioned to benefit from the buildout and adoption of AI.

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: #1105266

LPL Research
Last Updated: May 08, 2026

LPL Research provides its Weekly Market Performance for the week of May 4, 2026. U.S. equities advanced despite ongoing geopolitical volatility, as investors increasingly focused on strong corporate earnings, resilient economic data, and optimism for easing tensions between the U.S. and Iran. Cooling oil prices and falling Treasury yields supported sentiment, while fresh tech earnings reinforced risk appetite. Globally, equity markets were mixed but generally higher, navigating trade uncertainties, political developments, and earnings reports, while fixed income markets benefited from lower yields. Commodities trading remained volatile with oil still in the spotlight despite gold finding its footing.

Stock Index Performance

Index	Week-Ending	One Month	Year to Date
S&P 500	2.17%	8.91%	7.91%
Dow Jones Industrial	0.00%	3.32%	2.99%
Nasdaq Composite	4.35%	15.78%	12.75%
Russell 2000	1.42%	8.87%	14.95%
MSCI EAFE	1.62%	1.53%	8.04%
MSCI EM	5.74%	12.19%	23.94%

S&P 500 Index Sectors

Sector	Week-Ending	One Month	Year to Date
Materials	0.47%	-1.09%	12.36%
Utilities	-3.66%	-4.17%	4.98%
Industrials	0.12%	1.58%	11.63%
Consumer Staples	-0.17%	1.54%	9.88%
Real Estate	0.35%	4.75%	10.83%
Health Care	-1.40%	-4.42%	-7.64%
Financials	-1.56%	-0.15%	-6.74%
Consumer Discretionary	1.66%	11.79%	3.48%
Information Technology	6.86%	20.55%	15.49%
Communication Services	1.67%	12.82%	11.84%
Energy	-5.24%	-4.49%	23.83%

Fixed Income and Commodities

Indexes and Commodities	Week-Ending	One Month	Year to Date
Bloomberg U.S. Aggregate	0.05%	-0.18%	0.23%
Bloomberg Credit	0.13%	-0.06%	0.19%
Bloomberg Munis	0.17%	0.24%	1.16%
Bloomberg High Yield	0.02%	0.55%	1.35%
Oil	-6.26%	1.22%	66.42%
Natural Gas	-1.22%	0.81%	-25.50%
Gold	2.38%	0.10%	9.37%
Silver	6.75%	8.54%	12.26%

Source: LPL Research, Bloomberg 5/8/26 @3:15 p.m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

U.S. Equities: Stocks climbed through another week of headline volatility as market participants continued to refocus on strong fundamentals and a healthy macro backdrop. Geopolitical developments very much remained at the forefront of investors’ minds as the U.S. and Iran exchanged fire in the Persian Gulf while Washington submitted a fresh 14-point peace proposal to Tehran. With both sides still appearing committed to reaching a diplomatic resolution, and the White House remarking that the ceasefire remained intact and that negotiations are progressing well, easing upward pressure on crude prices and Treasury yields acted as a tailwind for equities.

Meanwhile, after a strong “peak week” for earnings last week, another 128 S&P 500 companies offered quarterly results over the last five days. Advanced Micro Devices (AMD) was among higher-profile highlights, as the leading competitor to NVIDIA (NVDA) gave robust long-term growth forecasts driven by artificial intelligence (AI) demand. Super Micro Computer (SMCI) was also a standout with its own upbeat AI-fueled guidance. On the macro front, improving payrolls data from ADP supported sentiment, while a stronger-than-expected Bureau of Labor Statistics payrolls print Friday morning added to risk-on trading and extended weekly gains.

International Equities: The regional STOXX 600 Index edged higher with individual markets trading mostly higher following the long weekend. Sensitivity to whipsaws in oil prices saw stocks flip between weekly gains and losses amid geopolitical uncertainty, amid a few other moving pieces. Tariff jitters returned to headlines late in the week after the European Union failed to secure a long-delayed U.S. trade deal, while the U.K. underperformed on political risk as local election results rolled in and some reports called for Prime Minister Starmer to plan his stepping down to avoid a disorderly exit. Earnings were also in focus, featuring strong sales results from Danish drugmaker Novo Nordisk and German automaker BMW, while London-based lender HSBC dropped on a profit miss driven by higher costs.

Trading across the Asia-Pacific region was relatively light amid the annual Golden Week holiday. South Korea surged over a four-day week as investors digested strong earnings reports from U.S. tech leaders, while the tech-heavy market of Taiwan also gained over a full five-day week. Greater China posted healthy gains following the holiday break, supported by improving services and stronger holiday travel data, hopes government incentives will help spark a recovery in home sales, and reports of DeepSeek fundraising. Japan ended higher after playing catch up in just a two-day trading week.

Fixed Income, Currency, and Commodity Markets

Fixed Income: Core bonds, measured by the Bloomberg Aggregate Index, traded higher this week as cooling oil prices relieved upward pressure on Treasury yields. If headline noise and choppy oil prices didn’t keep bond investors busy enough over the last five days, the Treasury Department quarterly refunding announcement also arrived this week.

The borrowing outlook offered by the Treasury was broadly steady but front‑loaded, with borrowing estimates for Q2 2026 and Q3 2026 that were in line with expectations, while also presenting higher projected end‑Q3 Treasury General Account (TGA) balances to accommodate larger outflows and increased Treasury rollover risks. Issuance guidance was unchanged as nominal coupons, Treasury Inflation-Protected Securities, and Floating Rate Notes were held flat for another quarter, with Treasury reiterating that current auction sizes are likely to remain in place for at least several more quarters. Plus, the combination of higher near‑term borrowing estimates and stable issuance guidance suggests a later start to coupon increases, now expected around May 2027, likely concentrated in 2-year to 7-year notes and driven by demand conditions.

Among other takeaways, the Treasury did announce changes to 20-year reopening settlement dates to ease repo specialness, and Treasury Borrowing Advisory Committee (TBAC) minutes highlighted ongoing study of investing excess TGA cash in repo markets — potentially reducing reserve volatility, though implementation appears distant. Bottom line, Treasury issuance remains well above pre‑2020 levels, while the buyer base has shifted away from price‑insensitive anchors (the Fed and foreign central banks) toward more price‑sensitive private investors, potentially needing higher clearing yields as supply grows. Treasury’s messaging reinforces a “steady but heavier” supply regime — issuance is large, growing more front‑loaded, and increasingly reliant on price‑sensitive private demand. Absent a renewed policy buyer or a meaningful deficit inflection, the bias is likely toward higher term premia and episodic volatility in the Treasury market.

Commodities and Currencies: The broader commodities complex reversed early-week strength to trade lower as elevated volatility continued. Oil markets remained focused on the ongoing closure of the Strait of Hormuz and brief clashes between U.S. and Iranian forces as American military ships helped guide tankers through the critical waterway. Despite the skirmishes, West Texas Intermediate (WTI) crude futures remain lower on the week on hopes of a firmer truce to end the conflict in the coming weeks, with Washington awaiting a response on its latest proposal. Meanwhile, gold found some traction with a weekly advance and four straight gains as optimism for a ceasefire helped alleviate worries around hotter inflation keeping interest rates elevated. Additional tailwinds for the yellow metal surrounded central bank buying and China’s central bank reporting its largest monthly purchase in over a year. Silver outperformed while copper also posted a solid advance. In currencies, the U.S. dollar weakened slightly, but the yen remained in the spotlight on signs of potential additional intervention overnight Wednesday.

Economic Weekly Roundup

Bureau of Labor Statistics data released Friday morning indicated U.S. companies added more jobs than expected last month, despite some uncertainty around rising costs due to the war in Iran. Nonfarm payrolls rose by 115,000 in April, besting consensus forecasts for a second month, to mark the largest two-month increase since 2024. Healthcare has been the primary driver of job growth over the last year, and continued to lead hiring again, while the transportation and warehousing, retail trade, and couriers and messenger services sectors all delivered multi-year highs in hiring. Manufacturing employment fell slightly. The unemployment rate remained at 4.3%, with key takeaways highlighted by signs that the labor market is becoming more balanced across industries.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: Existing Home Sales (Apr)
• Tuesday: NFIB Small Business Optimism (Apr), ADP Weekly Employment Change (Apr 25), Headline and Core CPI (Apr), Real Average Hourly and Weekly Earnings (Apr), Federal Budget Balance (Apr)
• Wednesday: MBA Mortgage Applications (May 8), Headline and Core PPI (Apr)
• Thursday: Import and Export Price Index (Apr), Initial Jobless Claims (May 9), Continuing Claims (May 2), Retail Sales (Apr), Business Inventories (Mar)
• Friday: Empire Manufacturing (May), Industrial Production (Apr), Manufacturing (SIC) Production (Apr), Capacity Utilization (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: #1101420

April Rotation: U.S. Large Caps Regain Dominance

Jeff Buchbinder | Chief Equity Strategist

Last Updated: May 07, 2026

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

With April behind us, we conducted a deep 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 ETFs. We analyzed flows to gain insight on investor demand and sentiment surrounding asset classes, sectors, and other segments of markets.

Broad Asset Class Flows

Following a global market sell-off in March, risk assets surged in April, with most equity categories posting double-digit gains. Easing geopolitical tensions and lower oil prices helped stabilize sentiment, allowing investors to refocus on corporate earnings. Quarterly results have generally exceeded expectations, with the Magnificent (Mag) Seven delivering strong performances and issuing guidance that continues to support optimism around the artificial intelligence (AI) theme. Bond yields declined as concerns about persistent inflation driven by the spike in oil prices dissipated.

The ETF market gained $1.4 trillion in assets from a combination of flows and performance, ending April at $14.9 trillion. Equities saw the largest inflow at $133 billion, followed by fixed income ($33 billion) and alternative investments ($4 billion). The only asset class to experience an outflow over the month was commodities, with a net outflow of $1.6 billion. One of the largest segments within commodities is oil. As tensions between the U.S. and Iran have eased — reducing concerns of a prolonged disruption in the Strait of Hormuz, a critical passage for roughly 20% of global oil supply — oil prices have pulled back significantly from their multi-year highs, leading to an outflow in broad-based and oil-specific commodity ETFs.

For the year-to-date (YTD) period, ETFs gathered $641 billion in assets, with roughly two-thirds of that capital flowing into equity ETFs. Equities now represent nearly 79% of total ETF market share, up from roughly 77% at the end of the first quarter. The combination of stellar performance and risk-on investor sentiment contributed to the surge in asset growth to end April. Bonds make up another 17% of the total ETF market share, with their relative share marginally decreasing. Combined, stock and bond ETFs represent more than 95% of the ETF industry. Outside of traditional asset classes, such as stocks and bonds, commodities represent roughly 2.5% of remaining ETF assets or $365 billion, followed by alternatives ($132 billion), currency ($128 billion), and asset allocation strategies ($43 billion). While commodities experienced net outflows during the month, all other segments saw net inflows, and every asset class has recorded positive net inflows year to date.

Risk-On Sentiment Returns: Equities Dominate April Flows

Trailing one-month, YTD, and one-year net asset flows across broad asset classes (AUM, Billions $)

Source: LPL Research, FactSet 04/30/26
Disclosures: Past performance is no guarantee of future results.

Asset Class Specific Flows

Equities: Within equities, domestic segments dominated monthly flows, with U.S. large cap, U.S. total market, and U.S. large growth rounding out three of the top four segments by flows. Broad U.S. large cap equity ETFs saw an astounding $72 billion in flows, more than seven times the next closest segment, U.S. total market. With hostilities easing in the Middle East and earnings estimates ticking higher, investors turned their focus back to the leading market tailwind, AI, and how its transformation and buildout is impacting the broader economy. Given their concentration in U.S. large cap indexes, representing roughly 30% of the S&P 500, investors can gain exposure to the Mag Seven by simply purchasing broad-based U.S. ETFs, which is what we saw in April with large cap, total market, and large cap growth gathering a little over $86 billion — representing nearly two-thirds of total ETF flows. Looking more specifically at the main input driving AI transformation, the third largest segment by flows over the month was global semiconductors, experiencing a nearly $6 billion inflow.

While U.S. equity ETFs gathered most of the capital this month, global and developed ex-U.S. markets continued to realize net inflows, with global total market, global ex-U.S. total market, and developed markets ex-U.S. ranking fifth, seventh, and ninth, respectively, in monthly flows. Foreign equities still outpaced domestic in performance over the YTD period, with emerging markets realizing a total return of nearly 15%.

At the other end of the spectrum, leveraged ETFs and ETFs predominantly comprised of oil stocks, saw meaningful outflows, with leveraged semiconductors and leveraged U.S. large caps experiencing outflows of $11 billion and $5.2 billion, respectively. Despite the rally in equities, investors continue to dump leveraged equity ETFs in favor of unleveraged, with both categories also the leading segments by outflows YTD. Given recent volatility in March — and even significant volatility in April 2025 — market participants may be looking for a smoother ride in stocks given leverage amplifies the magnitude of returns, positive and negative. Another notable segment that realized an outflow in April was U.S. small cap equities, losing $724 million in assets. YTD flows remain moderately positive (just above $1 billion), despite being one of the top-performing asset classes in 2026, with the Russell 2000 up over 13%. Although small cap equities have recently outperformed their large cap peers, they offer less direct exposure to AI. With AI back in focus — driven by its prominence in earnings and its broader economic impact — investors appear to have rotated out of small caps and into large caps over the month.

Fixed Income: In fixed income, the ultra-short Treasury segment was the third largest segment across asset classes (equity, fixed income, alternatives, etc.) by outflows, following a March in which they were the top asset-gatherer in a down market. Ultra-short Treasuries saw an outflow of $2.5 billion; however, they remained the second largest segment by flows YTD, gathering $47 billion. The next largest bond segment by outflows was floating rate investment-grade Treasuries, which saw an outflow of $778 million.

As previously mentioned, bonds broadly saw significant inflows in April, with more credit-sensitive sectors, such as high-yield and global bonds, realizing $3.9 billion and $3.2 billion in inflows, respectively. Like equity investors, bond investors rotated out of more conservative segments (ultra-short Treasuries) in March and into more aggressive sectors, with global bond markets entering the top 10 segments by flows YTD, gathering $17 billion. The appetite for fixed income remains healthy given the choppy environment in equities over the past 16 months and the ever-changing geopolitical landscape. While spreads remain tight in credit sectors, all-in yields remain attractive and fixed income continues to offer diversification benefits in a global multi-asset portfolio.

Diversifying Strategies: Across diversifying strategies, commodity ETFs, specifically those focused on oil, experienced the biggest outflows among diversifying strategies in April, losing $1.5 billion. As discussed earlier, oil prices came off multi-year highs, leading to a sell-off in the energy sector and those thematic ETFs tied to oil. With potential resolution on the horizon in the Middle East, performance may have peaked in this segment. Also, within commodities, silver continued to rank in the top 10 (fourth across asset classes) by outflows YTD, having lost $2.4 billion. Gold, on the other hand, realized an inflow in April ($329 million) but remains negative YTD ($1.3 billion). Gold sold off in March, along with equities and fixed income, and failed to climb back to its all-time highs as investors rotated more into growth-oriented assets, given easing inflation fears, lower geopolitical risk, and renewed enthusiasm around AI.

While small in size (0.9%), alternatives broadly have seen positive flows, with downside risk mitigation ETFs, also referred to as “buffer” ETFs, becoming more popular among 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.

U.S Large Cap Catapults to Top Segment by 2026 Flows

Trailing YTD net asset flows across FactSet segments (AUM, $ Billions)

Source: LPL Research, FactSet 04/30/26
Disclosures: 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 April flows data, there are a number of similarities. The STAAC continues to like the top asset class by assets and largest by YTD flows, U.S. large caps. The STAAC maintains a slight overweight to large/mid cap equities, with a tilt towards large/mid growth, which continues to benefit from sentiment surrounding AI and strong technology-driven earnings growth. Regionally, the STAAC has been warming up to the fourth-highest segment by flows YTD, emerging market equities, on improving fundamentals and technicals, but remains neutral from a geographic perspective within foreign equities, with a slight bias towards the U.S.

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.

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: #1104203

Kristian Kerr | Head of Macro Strategy
Last Updated: May 06, 2026

Additional content provided by Brian Booe, Associate Analyst, Research.

Gold’s behavior since the escalation of conflict in the Middle East has been, at first glance, counterintuitive. Periods of geopolitical stress typically push investors toward gold as a safe haven. Instead, gold prices have struggled to gain any sort of consistent traction, even amid one of the most severe global energy disruptions in decades. Understanding why requires stepping back and recognizing that gold does not sit neatly in any one asset category. It actually straddles several as gold simultaneously functions as a commodity, a reserve asset, and a currency surrogate. That overlapping identity is important, because it means the role gold plays in the monetary system is constantly in flux.

Gold Prices Have Struggled to Gain Traction Since the Middle East Conflict Began

Source: LPL Research, Bloomberg 05/05/26
Disclosure: Past performance is no guarantee of future results.

In 2019, gold was officially designated as a Tier 1 asset under global bank capital rules (Basel III). In practical terms, Tier 1 assets are those considered the highest quality for bank capital purposes. These are assets that carry either a zero or minimal risk weight and require little to no additional capital buffer. Cash and top‑rated sovereign bonds have long dominated this category. Gold’s inclusion reflects its treatment as a zero‑credit‑risk asset when held in allocated physical form on balance sheets. That status allows banks and sovereign institutions to count gold at or near full market value for capital adequacy purposes, rather than applying punitive haircuts that previously made it inefficient to hold during periods of stress. Importantly, this classification is about capital resilience, not liquidity per se. Gold still does not function like cash when immediate funding needs arise, especially during market dislocations — and that distinction matters right now.

The closure and effective throttling of the Strait of Hormuz has produced one of the largest energy supply shocks in history. With tanker traffic collapsing and exports curtailed, oil revenue across the Persian Gulf has fallen sharply. For countries that rely on energy exports to generate dollar inflows, this is not merely a growth issue; it is a liquidity problem.

In that environment, gold’s Tier 1 status makes it unusually usable. Not as a store of value, but as a source of dollars. Selling or swapping gold holdings provides immediate access to the currency that still sits atop the global funding hierarchy: the U.S. dollar. This helps explain gold’s unusual price action. Rather than seeing pure safe‑haven flows, we are likely getting official and semi-official supply, as some countries have been forced to monetize gold reserves to bridge revenue gaps created by disrupted oil exports.

We do not have to infer this stress indirectly. In late April 2026, U.S. Treasury Secretary Scott Bessent confirmed that multiple Persian Gulf allies had requested U.S. dollar swap lines to backstop liquidity amid the fallout from the Iran conflict and the restriction of Hormuz traffic. Public discussion has centered on the United Arab Emirates, but officials have been clear that the requests are broader and regional in scope. Swap line requests are not a sign of insolvency; they are a sign of dollar liquidity needs. Historically, when this dynamic emerges, domestic reserve assets, including gold, are often deployed to manage near term funding needs. In those moments, gold can function as less of a hedge and more as a balance sheet resource. That framing is critical. Gold is not failing in its role. It is simply being used.

At some point, a resolution (whether diplomatic or an escalation in hostilities that leads to overwhelming safe haven flows) around the Strait of Hormuz would remove this immediate source of supply overhang currently weighing on prices. But even then, gold’s next path may not be that straightforward. The period following major energy disruptions is typically one of rebuilding rather than diversification. Governments are likely to focus on securing energy supply, rebuilding inventories, and replenishing strategic petroleum reserves. These initiatives require capital, in dollars, and they compete directly with reserve accumulation in non-yielding assets like gold. In that sense, gold could temporarily fall down the priority list.

In the end, gold’s recent behavior is not a failure of the safe‑haven thesis; it is a reminder that funding needs often temporarily take precedence over fear‑driven positioning. When dollars are scarce and revenue is disrupted, even gold can become a source of funding. Until dollar funding pressures ease and energy flows normalize, gold may continue to trade less like a geopolitical hedge and more like a balance sheet asset.

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: #1101414

Scott Froidl | Senior Investment Analyst
Last Updated: May 05, 2026

In Q1 2026, I stepped into the role less of an interviewer and more of an investigator, sitting across the table from 35 portfolio management teams covering mutual funds, ETFs, and SMAs in large cap growth, large blend, and large value. Each team was asked the same eight questions — no leading prompts, no room to dodge — so the evidence was clean and comparable. As the answers piled up, patterns began to surface: repeated narratives told by different voices, subtle tells that revealed where conviction was genuine versus rehearsed. Outliers stood out like fingerprints at a crime scene — views that broke from consensus, either by design or by blind spot. By lining up these responses and weighing both what was said and what was left unsaid, I condensed the common themes driving opportunity today, while also flagging the risks lurking beneath crowded assumptions and shared beliefs. What follows is the case file.

AI, Healthcare, and Volatility: Positioning for 2026

As equity markets transition into 2026, large cap equity portfolio managers share a surprisingly consistent framework — paired with sharp disagreements on where risk and opportunity sit. A survey of large growth, value, and blend managers reveals a market shifting away from simple narratives toward selectivity, fundamentals, and manager skill.

At the center of this discussion sits artificial intelligence. Nearly every manager acknowledges AI as a long‑term structural force, yet far fewer believe it remains an easy trade. At the same time, healthcare has emerged as the most consistently cited undervalued sector across investment styles, even as managers concede it remains one of the hardest areas to execute well.

What follows is a synthesis of where managers align, where tension exists, and what these dynamics suggest for equity markets heading into 2026.

AI: A Structural Force That No Longer Guarantees Returns

AI dominates nearly every strategic conversation. Managers broadly agree it represents a multi‑year earnings driver spanning software, semiconductors, industrial automation, data infrastructure, and services. The difference now lies in execution.

The earlier phase of AI investing rewarded broad exposure. We believe that phase has largely passed. Managers increasingly emphasize real earnings, sustainable demand, customer monetization, and the durability of competitive advantage. Several indicate that portions of the AI infrastructure, semiconductors, and enabling hardware have high valuations, leaving a limited margin for error.

This shift has created three emerging camps:

• AI beneficiaries with recurring revenue and pricing power
• AI survivors capable of absorbing competition and margin pressure
• Mispriced AI losers where fear has outpaced fundamental deterioration

The tension centers on portfolio sizing. Some managers remain heavily allocated, treating AI as the next secular growth engine. Others deliberately neutralize exposure, framing AI as one of the largest potential sources of downside if expectations compress.

The implication is not AI fatigue, but higher hurdles. Exposure alone no longer drives results — security selection does.

Healthcare: Broad Opportunity, Narrow Margins for Error

Across styles and mandates, healthcare stands out as the most consistently cited undervalued opportunity. Managers describe the sector as under‑owned, poorly understood, and discounted relative to earnings potential.

Key drivers include:

• Aging demographics
• Innovation across biotechnology and medical devices
• Increased M&A discipline within pharmaceuticals and services

Despite this optimism, healthcare simultaneously earns a reputation as one of the hardest sectors to win consistently. Regulatory scrutiny, binary outcomes in innovation, pricing risk, and complex reimbursement structures demand deep fundamental analysis.

Some managers cite healthcare as their best alpha‑producing sector, while others describe it as chronically frustrating. The divergence suggests healthcare may reward skilled managers, while punishing surface‑level exposure.

Market Breadth: Opportunity, With Conditions

Many managers report early signs of market broadening beyond mega‑cap technology leadership. Industrials tied to power infrastructure, aerospace, automation, and select consumer discretionary areas receive increased attention. Software segments that suffered during peak AI enthusiasm also appear on opportunity lists.

That said, conviction remains uneven. Several managers caution that leadership rotation has been episodic and fragile. Rapid reversals and crowded positioning continue to dominate trading patterns.

The prevailing takeaway is conditional optimism: new opportunities exist, but require patience and acceptance of volatility. Sustainable broadening remains unproven.

Volatility Without Capitulation

A rare consensus exists around volatility expectations. Managers broadly anticipate heightened market swings driven by geopolitics, policy uncertainty, valuation dispersion, and narrative shifts.

Yet despite this expectation, very few portfolios have moved outright defensive. Traditional risk‑off behavior, rotating heavily into low‑beta sectors, appears limited.

Instead, managers redefine defense through:

• Earnings durability
• Balance sheet strength
• Cash flow consistency
• Quality of business models

Volatility is treated less as a signal to retreat and more as a condition to navigate.

Traditional Defensives Face New Scrutiny

Historically defensive sectors such as staples and utilities received widespread skepticism. Multiple managers describe these areas as crowded, expensive, and vulnerable if leadership rotates or yields move.

High‑quality compounders, once perceived as capital‑preservation vehicles, also attract valuation concerns. In several cases, managers argue these stocks now carry asymmetrical downside due to stretched expectations.

A minority still view traditional defensives as stabilizers, particularly in uncertain macro environments, but this is no longer the dominant stance.

Software: Opportunity or Structural Risk?

Software divides opinion as sharply as AI itself.

One group argues that broad selling pressure has created mispriced opportunities. In this framework, fears of AI‑driven disruption overshot reality, and select companies retain strong customer relationships, sticky revenue, and pricing power.

Others maintain deep caution. They cite risks of commoditization, new competitive entrants, and overestimated addressable markets.

Software increasingly behaves less like a monolith and more like a case by case exercise — forcing differentiation rather than blanket exposure.

2026 Equity Return Expectations: Moderation Reigns

Despite differences in narrative emphasis, most managers converge on a moderate return outlook for 2026.

Typical expectations cluster in the mid-single to low double digits, with returns driven primarily by earnings growth rather than valuation expansion. A minority project flat outcomes, while a smaller bullish group targets double‑digit results.

The common denominator is realism. Few expect a repeat of momentum‑driven expansions. Discipline, patience, and earnings delivery dominate expectations.

Stock Picker’s Market or Macro Market?

A final tension cuts across all discussions: the weight of macro versus fundamentals.

Growth‑oriented managers emphasize bottom‑up execution, arguing company‑specific outcomes will matter more than interest rates or policy headlines. Several value‑oriented perspectives lean more heavily on geopolitical risk, tariffs, and policy volatility.

This divide influences portfolio construction and risk tolerance, shaping positioning more than any single sector call.

What This Means for Allocators

The survey suggests a market where manager differentiation matters more than style labels.

Consensus exists around structural forces, earnings discipline, and volatility. Disagreement centers on positioning, sizing, and conviction. The absence of universally “safe” sectors reinforces the importance of process, skill, and risk awareness.

As markets move into 2026, success may depend not on buying the right theme but on navigating the tensions within it.

Summary Tension Map

Summary Visual (At‑a‑Glance) – Interviews With Large Cap Portfolio Managers During Q1 2026

Theme	Agreement	Disagreement
AI	Long-term structural force	How much to down, valuation risk
Healthcare	Undervalued opportunity	Hardest sector vs. best alpha
Volatility	Expected to be high	Whether to de-risk portfolios
2026 Returns	Mid‑single to low‑double digits	Degree of optimism (flat → +15%)
Market Breadth	Broadening signs exist	Real rotation vs. head fake
Defensives	Staples/utilities expensive	Some still see them as ballast
Software	Mispriced pockets exist	Or still AI‑vulnerable
Macro Importance	Volatility matters	Macro‑driven vs. fundamental‑driven

Source: LPL Financial Coverage List Portfolio Manager Survey, Large Cap Equity Strategies, Q1 2026

Methodology: Identifying Key Risks and Opportunities

To identify the most prominent risks and opportunity sets across our firm’s internal Coverage List, we conducted structured interviews with 35 portfolio management teams spanning mutual funds, ETFs, and SMAs. Each team was asked the same eight survey questions, ensuring consistency of inputs and comparability across strategies, vehicles, and investment styles.

Responses were first reviewed and normalized to account for differences in terminology and communication styles. Qualitative answers were then coded into thematic categories, allowing us to assess areas of convergence and divergence across managers. Themes that appeared repeatedly across multiple teams, particularly when supported by strong convictions or detailed rationale, were categorized as common views. Conversely, perspectives that meaningfully deviated from the broader sample, either in direction, magnitude, or underlying assumptions, were flagged as outliers.

To differentiate risks from opportunities, each theme was evaluated through a forward‑looking lens, considering how widely held assumptions, positioning, or macro and fundamental dependencies could influence future outcomes. Particular attention was paid to areas where consensus appeared strong but underlying conditions could change, as these scenarios may introduce asymmetric risk. Similarly, underappreciated or less crowded views — especially those supported by clear catalysts or structural trends — were evaluated as potential sources of opportunity.

This process resulted in a consolidated framework that reflects not only what portfolio managers are collectively emphasizing today, but also where expectations may be stretched, narratives overly aligned, or convictions unevenly distributed. This report summarizes the key insights derived from this analysis, organized around the eight survey questions.

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.

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