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Last Updated: March 06, 2026

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

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

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

U.S. and International Equities

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

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

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

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

Fixed Income, Currency, and Commodity Markets

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

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

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

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

Economic Weekly Roundup

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

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

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

The Week Ahead

The following economic data is slated for the week ahead:

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

Important Disclosures

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

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

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

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

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

Asset Class Disclosures –

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

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

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

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

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

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

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

Precious metal investing involves greater fluctuation and potential for losses.

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

This research material has been prepared by LPL Financial LLC.

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

For Public Use – Tracking: #1075789

Michael McClain | Alternative Investment Research Analyst and Due Diligence

Last Updated: March 05, 2026

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

Current Positioning

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

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

Potential Impact of Rising Geopolitical Risk

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

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

LPL Research Takeaway

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

Important Disclosures

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

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

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

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

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

Asset Class Disclosures –

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

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

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

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

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

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

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

Precious metal investing involves greater fluctuation and potential for losses.

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

This research material has been prepared by LPL Financial LLC.

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

For Public Use – Tracking: #1074051

George Smith | Portfolio Strategist

Last Updated: March 04, 2026

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

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

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

Immediate Market Reactions: Sometimes Sharp but Often Short-Lived

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

Stocks Largely Take Geopolitical Events in Stride

S&P 500 Index Returns and Select Geopolitical Event

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

How do Stocks Perform After Major Events?

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

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

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

How Do Stocks Perform After Major Events?

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

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

The Real Differentiator: Recession vs. No Recession

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

Cross Asset Market Behavior During Shock Events

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

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

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

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

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

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

Important Disclosures

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

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

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

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

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

Asset Class Disclosures –

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

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

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

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

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

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

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

Precious metal investing involves greater fluctuation and potential for losses.

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

This research material has been prepared by LPL Financial LLC.

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

For Public Use – Tracking: #1073427

Jeff Buchbinder | Chief Equity Strategist

Last Updated: March 03, 2026

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

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

Broad Asset Class Flows

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

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

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

Investors Remain Risk-On Despite Choppy Equity Markets

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

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

Asset Class Specific Flows

Equities

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

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

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

Fixed Income

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

Diversifying Strategies

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

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

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

Foreign Equities, Core Fixed Income Dominate YTD Flows

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

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

Key Tactical Asset Allocation Takeaways

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

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

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

Important Disclosures

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

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

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

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

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

Asset Class Disclosures –

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

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

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

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

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

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

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

Precious metal investing involves greater fluctuation and potential for losses.

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

This research material has been prepared by LPL Financial LLC.

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

For Public Use – Tracking: #1072278

Kristian Kerr | Head of Macro Strategy

Last Updated: March 02, 2026

Over the weekend, the United States and Israel conducted a coordinated series of missile and drone strikes against Iran, targeting several high-value military installations in an effort to hinder Iran’s nuclear development efforts. These operations resulted in the death of Iran’s Supreme Leader, Ayatollah Ali Khamenei, marking a significant escalation and immediately heightening regional tensions. Iran quickly retaliated by launching a broad series of missile attacks directed not only at Israel but also at multiple Gulf states, including Qatar, the United Arab Emirates, and Bahrain. The repercussions were felt across the region. Several Gulf countries responded by shutting down their airspace and closing their equity markets. The conflict also affected global energy flows. Tanker traffic through the Strait of Hormuz, a vital waterway that carries about 20% of the world’s oil supply, came to a near standstill as shipping companies diverted vessels away from the area for safety reasons. Plus, Qatar shuttered liquefied natural gas production at the world’s largest export facility after being targeted by an Iranian drone strike. President Donald Trump stated that U.S. strikes on Iran would continue, signaling that tensions are likely to remain elevated for the next few weeks.

From a market perspective, the energy market is the primary way through which this crisis is likely to impact global markets. Any sustained disruption to oil or natural gas flows, especially if both severe and long lasting, have the potential to influence inflation expectations, weigh on business confidence, and elevate volatility across asset classes. In simple terms, the more intense and prolonged the geopolitical shock, the larger the likely market impact.

This pattern was already evident when markets opened on Monday. Brent crude, the global benchmark for oil prices, briefly touched $82 per barrel as traders responded to the possibility of tighter supply conditions. A sustained period of elevated prices would place upward pressure on inflation expectations, and that in turn could have broader consequences for both equity and interest rate markets. However, for such a persistent rise in crude prices to materialize, markets would likely need evidence of a more prolonged or even total shutdown of the Strait of Hormuz. A disruption of that scale would represent a meaningful escalation relative to what has occurred so far and would justify a more substantial risk premium in energy markets. There is also a political dimension tied to Iran’s internal stability, particularly regarding how the Islamic Revolutionary Guard Corps (IRGC) chooses to respond. Whether it opts to pull back or escalate further will play a major role in determining how much of the current shock reflects elevated risk premiums versus a true disruption to physical supply.

Oil Prices Spike as Strait of Hormuz Tanker Traffic Stalls

Source: LPL Research, Bloomberg 03/02/26
Disclosures: Past performance is no guarantee of future results.

Given how rapidly the situation continues to evolve, closely following movements in energy prices remains one of the most effective ways to assess the level and durability of the underlying geopolitical risk. Oil and natural gas markets tend to adjust quickly to new information, which means they can serve as a real-time barometer of whether tensions are beginning to ease, stabilize, or intensify. Monitoring these markets will therefore be essential for understanding how the conflict may continue to influence global market conditions in the days and weeks ahead.

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: #1072327

LPL Research provides its Weekly Market Performance for the week of February 23, 2026. U.S. stocks fell for the week as concerns about AI’s disruptive impact drove a broader risk‑off shift. Technology and banks weakened, while defensive sectors held up better. International markets were mixed, with Asia outperforming despite global caution around AI. In bonds, falling yields supported core fixed income as investors grew more worried about economic momentum. Commodities strengthened on rising geopolitical tensions and dampened risk appetite, while the U.S. dollar edged slightly lower.

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 2/27/26 @2:30 p.m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

U.S. Equities: The S&P 500 ended lower on the week because of Friday’s decline after entering today’s session unchanged week to date. Friday’s decline secured a down February for the S&P 500 and the Nasdaq, although the Dow Industrials ended the month little changed. Market participants remained focused on the potential downside of AI in terms of disruption to various business models, most notably — but not exclusively — software. Fears of job losses related to AI, along with renewed — and related — concerns about potential losses in the private equity and credit markets were simply too much for the market to withstand. The major averages rolled over on Friday, led lower by banks and technology. The rally in Treasuries came despite a hot wholesale inflation report, providing evidence of the market’s economic growth concerns.

It didn’t help market sentiment in the technology sector that strong results from NVIDIA (NVDA) on Wednesday were greeted with heavy selling pressure after an initial move higher in after-market trading. Dip buying in beaten-down software names early in the week proved fleeting. Markets continued to exhibit dispersion, with defensive sectors including utilities, consumer staples, and healthcare each producing solid gains for the week. Energy also delivered solid gains as crude oil prices rose in anticipation of a potential U.S. military strike in Iran.

International Equities: AI fears that weighed on U.S. markets spilled over some into international markets this week as the developed international and emerging market (EM) stock indexes were only able to muster modest gains for the week despite the tailwind from the rotation out of U.S. technology stocks. The STOXX 600 secured its ninth straight positive month, but the best markets were in Asia, including Japan, Korea, and Taiwan, with the latter two countries getting a boost from strong demand for chips and memory given their exposure to the AI buildout. The U.S. dollar was relatively stable on the week and had little impact on non-U.S. returns.

Fixed Income, Currency, and Commodity Markets

Fixed Income: Despite modest credit spread widening during the week, core bonds, measured by the Bloomberg Aggregate Index, traded higher due to the continued rally out of the Treasury market. From the recent peak of 4.293% earlier this year, the 10‑year yield has fallen by roughly 30 basis points — the bulk of the move occurring in February. The decline in yields has coincided with AI‑driven displacement concerns weighing on equity and credit markets. Despite generally resilient economic data, which has continued to surprise to the upside (per the Bloomberg Economic Surprise Index), the drop in yields aligns with softening economic growth expectations.

Nominal Treasury yields reflect both inflation and growth expectations. Of the roughly 30 basis point decline, 25 basis points can be attributed to weaker economic growth expectations. The risk‑off tone has boosted Treasuries, with the Bloomberg Treasury Index up more than 1.5% month‑to‑date — making it the best‑performing major fixed income sector and reaffirming Treasuries’ role as a safe‑haven asset. Interestingly, the rally in rates was met with muted demand at this week’s 2‑year and 5‑year auctions (though Thursday’s 7‑year auction was solid), suggesting investors may view the rally as stretched at this point. With the 10‑year yield still within our fair‑value range of 3.75%–4.25%, we do not view this as an attractive point to chase the move. We remain neutral duration relative to benchmarks.

Commodities and Currencies: The broader commodity complex strengthened this week, highlighted by strong performance in precious metals. Silver led the advance with a 5.6% gain, while gold rose 1.3% and broke through resistance near its mid‑February highs. Safe‑haven buying intensified amid escalating U.S.–Iran tensions, uncertainty surrounding U.S. tariff policy, and a general pullback in equity markets. Oil prices also moved higher, with West Texas Intermediate (WTI) crude climbing nearly 1%. Concerns over a potential strike on Iran increased following the evacuation of non‑emergency U.S. embassy personnel in Israel. Adding to the anxiety, President Trump stated on Friday that he is “not happy” with Iran or the progress of negotiations over its nuclear program. At the same time, expectations grew that OPEC+ may announce higher production levels in April. The U.S. dollar eased modestly, pressured by declining interest rates and trade policy uncertainty, partially offsetting the impact of Friday’s hotter‑than‑expected wholesale inflation reading.

Economic Weekly Roundup

Consumer confidence rebounded as more consumers view a better employment situation, but the index is still significantly lower than the near-term high of late 2024.

• Consumers reported the most plentiful employment opportunities since November. The job market outlook for the next six months also improved in February. Good news for the consumer outlook.
• Spending plans on restaurants and travel were higher so far this year, supporting the discretionary sector outlook.
• The broader trend over the past 14 months is downward, as consumers are feeling pessimistic about geopolitical tensions and trade uncertainty.

Despite the rebound, the trend is still negative. The report revealed job market conditions are holding steady, one of the necessary conditions for the Federal Reserve (Fed) as they will likely hold rates steady for the next few meetings. The balance of risks tilt toward inflation, according to Fed officials. Inflation is likely to run hotter in the near term, consistent with the ISM prices paid signal and Friday’s wholesale inflation data, but by December, core PCE should be close to 2.2%.

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: S&P Global U.S. Manufacturing PMI (Feb final), ISM Manufacturing report (Feb)
• Tuesday: Wards Total Vehicle Sales (Feb)
• Wednesday: MBA Mortgage Applications (Feb 27), ADP Employment Change (Feb), S&P Global U.S. Services and Composite PMIs (Feb final), ISM Services Index (Feb)
• Thursday: Challenger Job Cuts (Feb), Import and Export Price Indexes (Jan), Nonfarm Productivity (Q4 preliminary), Unit Labor Costs (Q4 preliminary), Initial Jobless Claims (Feb 28), Continuing Claims (Feb 21)
• Friday: Retail Sales (Jan), Change in Nonfarm, Private, and Manufacturing Payrolls (Feb), Average Hourly Earnings (Feb), Average Weekly Hours All Employees (Feb), Unemployment Rate (Feb), Labor Force Participation Rate (Feb), Underemployment Rate (Feb), Business Inventories (Dec), Consumer Credit (Jan)

Important Disclosures

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

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

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

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

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

Asset Class Disclosures –

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

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

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

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

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

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

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

Precious metal investing involves greater fluctuation and potential for losses.

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

This research material has been prepared by LPL Financial LLC.

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

For Public Use – Tracking: #1071815

With traditional private equity investment exits facing difficulty over the past few years — albeit improving somewhat recently — private equity sponsors have increasingly relied on the use of continuation funds. Once a niche tool, continuation funds have become mainstream and investors should learn to understand how they work, why they exist, and what risks they carry.

What Is a Continuation Fund?

A continuation fund is a new vehicle created by a private equity manager to hold onto one or more portfolio companies beyond the typical ~10 years of an original fund. Rather than selling an asset outright at the end of a fund’s life, the general partner (GP) transfers the underlying investment into a new, separate fund. This provides existing limited partners (LPs) with a choice — either cash out now or roll their existing investment into the new vehicle and maintain exposure to the existing portfolio company. New investors, often large secondary market buyers, come in to provide liquidity for those who do not wish to invest in the continuation fund. The GP is assuming that the company still has meaningful upside and that additional time will produce a more attractive outcome.

Why Do Managers Use Them?

The appeal for general partners is straightforward. Selling a high-conviction portfolio company in a weak market can reduce or leave additional value on the table. Continuation funds allow managers to maintain ownership, avoid a fire sale, and/or keep collecting management fees. For the GP, it also means retaining a flagship asset that supports their track record and next fundraise. For LPs who roll over, they maintain exposure to a company they are already familiar with. For those who want out, the structure offers liquidity without waiting for an uncertain initial public offering (IPO) or sale.

Impact on Public Markets

Continuation funds have a meaningful indirect effect on public equity markets. By allowing GPs to defer exits, they reduce the pipeline of IPOs that would otherwise enter public markets. When large, mature private companies stay private longer, they end up representing a growing part of the economy that public market investors cannot access.

This dynamic has contributed to the well-documented decline in the number of public equity firms. Fewer companies going public means less opportunity for traditional fund managers. It also means that some of the most compelling growth stories play out entirely in private ownership, with public market participants left holding the slower-growth, post-peak version of a company if and when it finally lists.

Controversies and Conflicts of Interest

With this growth, there has also been significant criticism. The main problem is a conflict of interest inherent to the structure itself. The GP simultaneously represents the seller (the original fund), the buyer (the new continuation vehicle), and sets the valuation at which the transfer occurs. Critics argue that GPs are incentivized to only choose their best assets for continuation funds, in turn, leaving weaker companies in the original fund to wind down.

Key Risks for Investors

For LPs considering rolling into a continuation fund, several risks deserve attention. Valuation opacity remains the central challenge, as private assets are difficult to price independently, and the GP’s mark may not reflect what an arm’s-length buyer would pay. There is also concentration risk, as continuation funds are often single-asset or two-asset vehicles, meaning there is no portfolio diversification to cushion against a bad outcome. Liquidity extension is another concern. Rolling over means recommitting capital for an uncertain additional period, often another three to five years, with no guarantee of an exit at the end. And fee structures can reset, meaning investors who roll may find themselves paying full management fees again on assets they have already held for a decade.

LPL Research Takeaway

Continuation funds are neither inherently good nor bad, rather, they are a tool whose value depends on their proper use. When deployed to preserve genuine value in a difficult exit environment, they may serve investors well. When used to extend GP fee income or obscure underperformance, they do not. As an investor, the right question to ask is not whether a continuation fund exists, but why and whether the GP’s interests truly align with yours.

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: #1070629

Dr. Jeffrey Roach | Chief Economist

Hypothetical Scenario

Let’s develop a scenario to explain the importance of foreign exchange (FX) markets and specifically, the dominance of the U.S. dollar. Say, for example, Thailand, one of the world’s major rice exporters, engages in trade with Brazil, the second‑largest cotton exporter. When these two countries conduct bilateral trade, they typically do not settle transactions directly in Thai baht or Brazilian real. Instead, they frequently convert their home currencies into U.S. dollars, the dominant invoicing and settlement currency in global trade and FX markets. Because the U.S. dollar is one of the most liquid and widely accepted intermediaries for cross‑border payments, it is the de facto choice for this hypothetical Thai-Brazilian trade settlement.

Dominance of the Dollar

The previous scenario explains why the dollar has maintained such dominance in global trade. One of the most convincing stats for the dollar’s reserve currency status is the fact that the U.S. dollar is in roughly 90% of all global FX transactions. And that hasn’t materially changed for over two decades. But in contrast, in recent years, the euro was in roughly 30% of FX transactions, down from roughly 40% in 2010^[1].

Network effects help explain why the U.S. dollar maintains its dominant role as the world’s primary reserve currency. Because so many countries, financial institutions, and global markets already use the dollar for trade, investment, and reserve holdings, its value and convenience increase as more participants rely on it. This broad adoption creates a self‑reinforcing cycle: central banks continue to hold dollars because many global transactions are dollar‑denominated, and global transactions remain dollar‑denominated because central banks continue to hold dollars. Because so many are already using the dominant product, switching becomes difficult, and competitors struggle to gain traction.

In addition to the vast majority of all FX transactions, the dollar makes up a sizable share of foreign exchange reserves. The International Monetary Fund’s Currency Composition of Official Foreign Exchange Reserves (COFER) data underscore this dynamic, showing that the U.S. dollar represents the largest share of global foreign exchange reserves. For example, it accounted for roughly 57% of world reserves in the latter half of 2025.

U.S. Dollar Has the Largest Share of Global Foreign Exchange Reserves

Source: LPL Research, International Monetary Fund 02/25/26

But Not Without Competitors

Such persistent scale and liquidity make it difficult for alternative currencies to displace the dollar, illustrating how network effects entrench incumbency in the international monetary system.

The BRICS nations (Brazil, Russia, India, China, and South Africa, along with newly expanded members) have worked to create a network for cross‑border transactions in national currencies without relying on Western‑dominated systems like SWIFT or reserve currencies such as the U.S. dollar but have run into challenges getting other trading partners to align^[2]. Nations unhappy with dollar dominance will continue to iterate on ways to displace the dollar so threats will continue. But as the Fed paper explains, the dollar is deeply embedded in global finance and will likely remain dominant “for the foreseeable future.”

Conclusion

Trading tensions could create fodder for countries to coalesce around non-dollar denominated trading. Political firestorms, such as a politicized Federal Reserve, also create stresses in cross-border payments. Over the longer term, several developments could gradually increase the appeal of alternative currencies. Geopolitical concerns have prompted discussion about diversification, but the dollar’s reserve share has not meaningfully declined, partly because most other major reserve currencies are issued by U.S. allies. Greater European fiscal integration and the expansion of jointly issued EU bonds could strengthen the euro’s role, though political fragmentation remains a limiting factor. China’s economic size continues to grow, yet the renminbi’s international prospects are constrained by capital controls, limited convertibility, and weak investor confidence. Technological shifts, including digital currencies and stablecoins, could either weaken or reinforce the dollar, especially since most stablecoins are already dollar‑linked. Overall, absent severe disruptions to dollar stability combined with major improvements in competing currencies, the dollar is likely to remain the world’s dominant reserve currency for the foreseeable future.

[1] See Fig. 11, The Fed – The International Role of the U.S. Dollar – 2025 Edition “Because one currency is purchased and another currency is sold in FX transactions, each trade is counted twice, so the sum of the FX transactions measure is 200 percent.”

[2] The BIS announced in October 2024 that it was handing the project over to the partners. Project mBridge reached minimum viable product stage

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: #1070107