Blog

LPL Research
Last Updated: March 20, 2026

LPL Research provides its Weekly Market Performance for the week of March 16, 2026. Markets navigated a choppy week marked by ongoing geopolitical tensions and shifting rate expectations amid a flurry of global central bank decisions. U.S. equities showed resilience early on but ultimately slipped as inflation concerns, elevated energy prices, and hawkish Federal Reserve takeaways weighed on sentiment. International markets faced similar headwinds, with European equities pressured by rising rates and higher crude prices, while Asian markets ended mixed amid a few different local developments. In fixed income, global front‑end yields surged as markets reassessed the path of rate cuts, while commodities remained volatile with energy prices rising and precious metals declining.

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 3/20/26 @3:23 p.m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

U.S. Equities: Major domestic benchmarks, although lower, continued to display some resilience over the last five days amid quite a few moving pieces originating from at home and abroad. At the forefront, inflation and economic growth jitters from still elevated energy prices kept a lid on equities, however, the S&P 500 received some support from optimism that additional tankers will pass the Strait of Hormuz after two vessels traversed the waterway last weekend with more attempts reportedly queued up. Wall Street bulls held the line to post back-to-back gains with positioning and sentiment dynamics, a rate reprieve, as well as the favorable earnings backdrop flagged for the early week upside. Nonetheless, lingering geopolitical overhangs pressured equities back below the weekly unchanged point in conjunction with Bureau of Labor Statistics data indicating producer price pressures increased more than expected last month.  Federal Reserve (Fed) rate cut expectations were also pushed out to 2027 on hawkish-leaning takeaways from Wednesday’s decision. Simultaneously, regional Iranian attacks on key energy facilities easily offset de-escalatory remarks from President Trump and Israel’s Prime Minister Benjamin Netanyahu, before the equity slide was accelerated Friday by additional U.S. military assets reportedly heading to the region.

International Equities: Volatility in European equities remained elevated for another week of trading as the STOXX 600 dropped just over 3.75%. Crude oil posting another week of gains dragged on the oil- and natural gas-sensitive region, while central bank takeaways also dominated investor attention. Following Thursday’s European Central Bank (ECB) hold, remarks from ECB officials that a rate hike could be considered soon if price pressures continue to build was among standout headlines, while upward pressure on rates exacerbated the risk-off tone over the last two days of the week. The Swiss National Bank and Bank of England also fulfilled expectations of no change, as well as Sweden’s Riksbank.

In Asia, geopolitical developments remained in focus in addition to a few regional developments, but major exchanges broadly ended mixed. Greater China was among laggards as tech names faced pressure from muddy artificial intelligence profit worries after Tencent curtailed buybacks and offered little insight into their agentic AI profitability strategy. Plus, the People’s Bank of China held one- and five-year loan prime rates unchanged, after rate cut bets fizzled following strong activity figures earlier in the week. Japanese shares reversed gains on Thursday after the Bank of Japan cited the geopolitical uncertainty in the Middle East when holding rates unchanged. Elsewhere, South Korea held a weekly jump from authorities’ announcement of restrictions on publicly traded firms listing certain subsidiaries to help enhance shareholder value, while unemployment hit a three-month low.

Fixed Income, Currency, and Commodity Markets

Fixed Income: Core bonds, measured by the Bloomberg Aggregate Index, traded lower after reversing a week-to-date gain as U.S. Treasury yields — alongside developed market bond yields — moved sharply higher to end the week, with 10‑year U.K. Gilts at 4.93%, the highest level since 2008.

In the U.S., the Treasury yield curve has bear‑flattened aggressively this week. The 2s/10s curve sits near the flattest level since last July and down from its recent peak of 73 bps on February 5. The flattening is being driven by a front‑end selloff: the 2‑year yield has risen 42 bps since February 5, while the 10‑year is down only 12 bps. Markets have shifted from pricing in two-and-a-half Fed rate cuts for 2026 to now assigning a non‑trivial probability of rate hikes this year. Markets have also priced in the end of the global rate‑cutting cycle, with rate hike probabilities increasing across all major developed markets. Higher front‑end yields are being driven by inflation concerns linked to the conflict in Iran. U.S. two‑year and five‑year TIPS breakevens have become unanchored and continue to rise, though longer‑term inflation expectations remain well‑contained. With long‑term inflation expectations still stable — and with the bar for rate hikes still high, as reinforced by Chair Powell earlier this week — market pricing may be overly hawkish, in our view. Front‑end yields globally now appear too elevated. This move provides another opportunity for cash investors to extend excess cash out a few years (but not beyond five years) to take advantage of the backup in yields.

Commodities and Currencies: The broader commodities complex remained volatile but ultimately ended the week moderately lower. Energy prices continued to take center stage with both West Texas Intermediate (WTI) and Brent crude gaining ground as Iran’s blockade of the Strait of Hormuz and regional attacks on major gas fields and broader facilities continued. Mixed headlines around the U.S.-Iran conflict kept trading choppy with Brent briefly trading near $120, before paring gains after President Trump stated the U.S. will look to end the conflict soon while Israeli Prime Minister stated Iranian uranium enrichment and missile manufacturing capabilities were now inoperable. However, little signs of de-escalation on Friday left prices higher and continued to widen the spread between the global benchmark Brent and North America’s WTI crude. The overall commodities complex was dented by a notable slide in gold and silver prices, while grains also declined. The dollar weakened over the last five days.

Economic Weekly Roundup

March FOMC Meeting: For obvious reasons, the Federal Open Market Committee (FOMC) struck the phrase “signs of stabilization” from Wednesday afternoon’s statement as they maintain a holding pattern.

• The unemployment rate may no longer “show some signs of stabilization” but at least it’s been little changed in recent months. We expect the weakening labor market will likely be more of a risk in coming months, giving the Fed room to cut rates later this year.
• The 2026 core inflation forecasts were revised up to 2.7% from 2.5% in the latest Summary of Economic Projections (SEP). The risk here is that disruptions within global oil supply last longer than expected. If economies must deal with elevated petroleum prices now through the summer, the economic impact will be larger than currently priced today.
• Growth for both 2026 and 2027 were also revised higher, limiting the stagflation risks according to Fed officials.
• The expected terminal interest rate was raised up to 3.1% from 3.0%, revealing policy makers’ concerns that inflation is getting embedded into the framework of the economy.

The upward revision to 2026 growth is misleading if not presented in context. The weaker growth in Q4 2025 showed the economy is on feeble footing than originally estimated. The likely productivity boost from AI could not come at a better time, if it can be the antidote to slower population growth, shrinking labor force, and persistent services inflation.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: Chicago Fed National Activity Index (Feb), Construction Spending (Jan)
• Tuesday: ADP Weekly Employment Change (Mar 7), Philadelphia Fed Non-Manufacturing Activity (Mar), Nonfarm Productivity (4Q final), Unit Labor Costs (4Q final), S&P Global U.S. Manufacturing, Services, and Composite PMIs (Mar preliminary), Richmond Fed Manufacturing Index (Mar), Richmond Fed Business Conditions (Mar)
• Wednesday: MBA Mortgage Applications (Mar 20), Import and Export Price Indexes (Feb), Current Account Balance (4Q)
• Thursday: Initial Jobless Claims (Mar 21), Continuing Claims (Mar 14), Kansas City Fed Manufacturing Activity (Mar)
• Friday: University of Michigan Consumer Sentiment Report (Mar final), Kansas City Fed Services Activity (Mar)

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: #1081285

John Lohse | Portfolio Strategist, Model Portfolio Management
Last Updated: March 19, 2026

LPL Research
Last Updated: March 18, 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.

The ongoing situation in the Middle East continues to drive markets in the short term. Oil production and shipping channels remain the focal point from an investor’s perspective as surging crude prices have led to concerns about the potential for accelerating inflation and higher interest rates. Until there is greater clarity around the duration of the conflict, this dynamic will remain critical to economic growth. My LPL colleagues have done an excellent job covering that topic, so let us switch gears and consider another topic that could be an issue for investors, if and when the military tensions begin to subside — midterm elections.

Historically, the State of the Union address has been the unofficial start of the midterm election campaign. With the president’s February 24 speech in the rearview mirror, election related headlines are likely to increase over the coming months and eventually work their way into investor psychology. What does history suggest markets might experience over the next several months?

Increased Rhetoric Leads to Muted Returns

Only three times has the party that is in the White House picked up seats in the House of Representatives during midterm elections. It occurred in 1934 with Franklin D. Roosevelt, 1998 with Bill Clinton, and 2002 with George W. Bush. The number of seats picked up was in the single digits. It is far more common for the president’s party to lose seats during midterm elections. On average, the loss of seats is in the mid-twenties, and the current consensus is for that to happen this year. Despite the predictability of this outcome, markets still tend to react ahead of Election Day.

Campaign rhetoric grows increasingly loud as Election Day approaches. Challengers tend to highlight things that are wrong with the current situation caused by policy failures or propose large pieces of legislation to solve economic and social problems. Layer on top of that, the potential for this campaign to take place against the backdrop of war and the daily headlines can weigh on nerves and investor anxiety. Markets, as always, do not like uncertainty.

S&P 500 Tends to Underperform in Midterm Years

S&P 500 Index average returns since 1931

Source: LPL Research, Capital Group, RIMES, Standard & Poor’s 12/31/25. Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of the predecessor index, the S&P 90.
The chart shows the average trajectory of cumulative price returns for the S&P 500 Index throughout midterm election years compared to non-midterm election years. Each point on the lines represents the average year-to-date return as of that particular month and day and is calculated using daily price returns from January 1, 1931, to December 31, 2025.

Midterm election years have average returns that are roughly five percentage points less than the other three years of a presidential term. Volatility also tends to increase in the six months prior to midterm elections. This combination, lower returns and higher volatility, helps explain why election years often feel more unsettling for investors, even when longer-term fundamentals remain intact.

The Third Year of the Presidential Cycle

Once the fog of the election season lifts, investors return to fundamental data in evaluating markets. In the third year of a presidential term, administrations often pivot toward pro-growth policies, whether to support reelection efforts, cement their legacy, or strengthen their parties for the next election cycle. This tends to lead to an improving economy, more supportive fiscal and regulatory policies, and a better outlook for corporate earnings. Taken together, these factors have historically made the year following midterms one of the strongest periods for equity market returns.

S&P 500 Index Price Return One Year After Midterm Election

Red bars = Republican President; blue bars = Democrat President
Source: LPL Research, Capital Group, RIMES, Standard & Poor’s 01/15/26.
Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.
Calculations use Election Day as the starting date in all election years and November 5 as a proxy for the starting date in other years. Only midterm election years are shown in the chart.

And it happens no matter what party controls the White House, Senate, or House of Representatives. Markets appear far more responsive to reduced uncertainty and improving growth expectations than to the power sharing arrangement in Washington.

Everything Else Matters

While the data tells an understandable story given the level of angst that accompanies election years, election years don’t occur in a vacuum. Other factors impact markets, and it is hard to separate what is driving the market day-to-day and month-to-month. Geopolitical risk is always a concern and it is the most important risk currently. The impact of higher oil prices on jobs creation and the path of inflation will play a major role in how the Federal Reserve (Fed) will approach interest rate policy as the year unfolds. These decisions could have an impact on economic growth, which would be important for yields on the 10-year Treasury bond and corporate earnings. Over the long term, interest rates and earnings are the key drivers to what valuation levels stocks will ultimately trade at, not election outcomes alone.

Portfolio Positioning

Higher oil prices are challenging the consensus views of an economy that was expected to accelerate as the year unfolds and a Fed that would reduce interest rates as inflation moderates. Rhetoric along the campaign trail could also potentially do the same thing. And for the remainder of this year, those issues could be intertwined.

Periods of market stress are almost inevitable. Historically, the average calendar year includes a drawdown of roughly 14% at some point, even in otherwise strong years.

Sell-Offs Happen Every Year, But Are Often Short-Lived

S&P 500 maximum intra-year declines vs. calendar year returns

Source: LPL Research, FactSet, Standard & Poor’s, J.P. Morgan Asset Management 03/13/26.
Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.
Returns are based on price index only and do not include dividends. Despite average intra-year drops of 14.2%, annual returns were positive in 35 of 46 years. Intra-year drops refer to the largest peak-to-trough decline during the year. Returns shown are calendar-year returns from 1980 to 2025, over which the average annual return was 10.7%.

The famous Fidelity portfolio manager, Peter Lynch, once observed that “people have lost more money preparing for a correction than they actually do in a correction.” History supports that insight. Despite the selloffs that have and will continue to occur every year, in the last 23 years, there have only been three years in which market returns have declined by more than 1%. Please note that past performance does not guarantee future results.

As a result, wholesale changes in portfolios in response to headlines, whether geopolitical or political, are rarely warranted. Be on the lookout for any changing fundamentals, remain diversified, and focus on long-term objectives.

Well-constructed portfolios are designed to participate in market upside while managing risk during inevitable periods of weakness. We believe the best investment strategy during an election year is to vote in the booth, not in your portfolios.

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: #1080147

Jeff Buchbinder | Chief Equity Strategist
Last Updated: March 17, 2026

All Eyes on Iran and the Strait of Hormuz

Investors’ attention remains squarely focused on Iran, as it should be. West Texas Intermediate (WTI) crude is trading near $100 per barrel, more than $40 above the recent mid-December low as tanker ships are still not sailing freely through the Strait of Hormuz. Iran is allowing its own tankers to get through, not surprisingly, sending important oil to China (China imports about 90% of Iranian oil exports). Reportedly Iran has allowed tankers bound for several other Asian countries including India and Pakistan to traverse the vital and dangerous waterway, easing some pressure on global oil prices as the week began.

As has been the case from day one when the first airstrikes began, the key factor in assessing economic and market impact is the duration of the effective Strait of Hormuz closure and resulting effects on prices of energy and other commodities. Prediction markets are split on whether the conflict ends by the end of May. While no one knows what the off ramp looks like, we do know that opening the Strait will be messy and is likely to take at least a few more weeks. Our allies have been reluctant to send naval escorts to the region to help, putting more pressure on President Trump to create the conditions for a cease fire and clear the Strait unilaterally. As we have written about several times in recent weeks, including in our Weekly Market Commentary on March 9.

Earnings Impact

Amid all of the attention on the war in the Mideast, earnings expectations have held up remarkably well and remain supportive of stock prices. Massive capital investment in AI capabilities continues at a historic pace, with plans ratcheting higher each quarter and powering strong technology sector earnings. In fact, the technology sector contributed over half of overall earnings growth for the S&P 500 last quarter (8 out of 14 points) and will likely drive an even larger percent contribution in the first quarter. Fiscal stimulus from the One Big Beautiful Bill Act (OBBBA) is also providing support for earnings by driving capital investment and spending.

Remember the historical pattern is for earnings to fall 4% to 6% short of estimates at the beginning of the year. Last year was a different story, and we’re seeing the same unusual strength in earnings estimates for this year and 2027 so far this year.

S&P 500 Earnings Estimates Have Been Rising Steadily Despite AI, Mideast Concerns

Source: LPL Research, FactSet 03/16/26
Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not materialize as predicted and are subject to change.

Rising estimates for the energy sector are helping push overall 2026 earnings estimates higher as shown in “It’s Not Just Energy Boosting Earnings Estimates.” But it’s not alone. The technology and materials sectors are contributing more than their fair share. This is just March to date – barely two weeks.

It’s Not Just Energy Helping Boost Earnings Estimates

Source: LPL Research, FactSet 03/16/26
Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not materialize as predicted and are subject to change.

Bottom line, earnings momentum is strong and is likely to remain so despite the war in Iran. Given the drivers of U.S. economic growth remain in place and the U.S. is energy independent, double-digit earnings growth in 2026 remains likely and will likely put a strong foundation underneath the stock market until the geopolitical threat eases, helping to mitigate downside risk. We continue to monitor the situation closely.

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: #1080049

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

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

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

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

U.S. and International Equities

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

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

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

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

Fixed Income, Currency, and Commodity Markets

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

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

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

Economic Weekly Roundup

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

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

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

The Week Ahead

The following economic data is slated for the week ahead:

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

Important Disclosures

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

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

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

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

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Asset Class Disclosures –

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

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

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

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

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

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

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

Precious metal investing involves greater fluctuation and potential for losses.

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

This research material has been prepared by LPL Financial LLC.

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

For Public Use – Tracking: #1078431

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

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

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

Bulls Face Another Big Test

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

Peak Fear?

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

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

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

Oil in the Driver’s Seat

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

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

Oil Prices Fade, But Remain Uncomfortably High

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

History as a Guide

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

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

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

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

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

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

Brent Crude Comparison to Russia’s Invasion of Ukraine

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

Conclusion

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

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

Important Disclosures

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

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

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

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

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Asset Class Disclosures –

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

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

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

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

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

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

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

Precious metal investing involves greater fluctuation and potential for losses.

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

This research material has been prepared by LPL Financial LLC.

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

For Public Use – Tracking: #1078023

Thomas Shipp | Head of Equity Research
Last Updated: March 11, 2026

Additional content provided by Tucker Beale, Sr. Analyst, Research.

As the capital expenditure (capex) race for compute continues, we thought that it would be worthwhile to briefly outline the current state of play facing the well-publicized data center buildout. To understand why so much capex is needed to support artificial intelligence (AI), we must first understand how data centers are built and operated.

Let’s start with the basics. What are data centers and why has the AI race sparked such demand for them? A data center is essentially a warehouse-sized computer. Just like your home computer, data centers need chips to carry out the computations that power our lives. These chips require sophisticated software, data storage, fast connections, reliable power, and no small amount of cooling to operate properly. The difference between our devices and these data centers is the scale and, in the case of the data centers powering AI, chip specialization.

The Almighty Chips (Semiconductors)

Most of the chips locally powering your devices are called central processing units, or CPUs. CPUs handle a wide range of computations and can be thought of as generalists powering most of the work that our computers do. While CPUs are great for carrying out a wide range of computations, occasionally the need arises for your computer to do a lot of very simple and very similar computations as quickly as possible. The traditional use case for these types of computations was graphics visualization for programs such as video games. The equation to change a pixel on a screen from one color to another may be very simple, but there are a lot of pixels that need to be updated and at a high frequency. This is where graphics processing units or GPUs come in.

Think of CPUs as painting a picture with a paintbrush, whereas GPUs create the same image using 1,000 paintball guns all firing at the same time. As luck would have it, parallel processing of simple computations at lightning speed was the unlock needed to power AI. Tensor processing units, or TPUs, are custom application-specific integrated circuits (ASICs) that are more efficient for some AI applications than GPUs but need to be custom-tailored to a more limited set of use cases. Efficiency gains are incredibly important when delivering compute at scale, but GPUs remain the primary driver of AI.

This is in part due to the proliferation of Nvidia’s CUDA parallel computing platform and software used in the development of AI models. The tight integration of the software development layer (CUDA) and hardware (GPUs) has created an AI platform with obvious switching costs as well as network economies: as the community of AI developers all “speaking the same language” grows larger, more data center customers prefer the platform with the largest, most productive developer ecosystem. Tradeoffs between efficiency and flexibility have led data center operators to consider a mix of general-purpose GPUs and task-specific TPUs in the compute stack. When building data centers, deciding which chips to fill them with matters as continuous semiconductor innovation can drive obsolescence over shorter-than-expected timelines.

Power

All this computational might comes with very high-power requirements, and outages can cause expensive downtime. Data center power consumption was traditionally measured in megawatts (MW). One megawatt-hour (MWh) is enough to power the average American home for over a month. The largest projects are now being measured in gigawatts (GW) or 1,000 megawatts. A 1GW data center could consume as much energy as roughly 840,000 American homes.

As AI demand increases, so do the power consumption requirements. Meaning that with continued progression, barring significant improvements in efficiency gains, power requirements are likely to continue increasing over time. This has put AI initiatives at odds with environmental initiatives and has caught the attention of regulators.

Cooling

In the process of converting power into AI insights, the chips involved create a lot of heat. If the chips are not properly cooled, this can lead to critical failures and the loss of expensive equipment in very little time. Traditionally, air cooling was sufficient, but liquid cooling appears to be required to efficiently utilize the latest generation and future generation of chips. This requires a new set of expertise and expense for new data centers or expensive retrofits to existing data centers looking to make use of the best chips available. The costs associated with retrofitting a traditional data center could make doing so not economically viable, increasing the risk of data center operators owning unattractive assets that cannot serve the high-end AI compute demands in the market.

Conclusion

Strong growth in demand for compute in the coming years is a reasonable base case. That said, the operational complexity, infrastructure reliance, risk of obsolescence, and resource intensive nature of data center buildouts mean that there will likely be snags along the way. We would expect capacity constraints to remain a consistent issue without either a step-change in chip efficiency or a massive buildout of new energy capacity (likely nuclear, which we expect will take a minimum of seven years to materially bring online). These issues are compounded by increased regulatory pressure in response to rising data center energy and water usage. All of this to say, even if we hold AI demand growth constant, investors should be wary of the risk that meeting that demand could take longer and/or cost more than expected.

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: #1077274

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

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

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

The Iran Conflict

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

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

Market-Implied Inflation Expectations Have Shifted Higher

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

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

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

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

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

Important Disclosures

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

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

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

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

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Asset Class Disclosures –

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

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

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

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

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

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

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

Precious metal investing involves greater fluctuation and potential for losses.

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

This research material has been prepared by LPL Financial LLC.

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

For Public Use – Tracking: #1076420