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  • Private Credit Enters a Reset Phase

    Private Credit: A Cycle of Reset

    Kristian Kerr | Head of Macro Strategy
    Last Updated: April 09, 2026

    Private markets benefited enormously from the post-Great Financial Crisis era of ultralow interest rates that stretched through much of the 2010s and into the early 2020s. Amid regulatory change and muted returns in traditional fixed income during this time, investors were increasingly pushed into alternative areas of capital markets in search of yield. Private credit, in particular, emerged as a favored destination for institutional capital, including pensions, endowments, and insurers. The sheer volume of capital entering the space created competitive pressures that, in hindsight, were distinctly late cycle. Spreads compressed, underwriting standards loosened in some segments, leverage crept higher, and growth at any cost became a dominant objective for many managers. In many cases, deals were structured under assumptions that financing would remain cheap, and refinancing would be readily available. As liquidity ebbs and rates normalize at higher levels, those assumptions will undoubtedly be tested.

    It is important to note, however, that acknowledging excesses and the existence of a credit cycle does not mean the private market asset class is structurally impaired. Credit cycles are not a flaw of the system; they are a feature of it. Periods of easy money tend to inflate asset prices and encourage excess risk-taking, while tighter financial conditions reassert discipline, reset valuations, and reward selectivity. We are clearly in that phase today. While additional adjustment and some degree of further pain appear likely, overall loss rates in private credit remain low by historical standards. Even if defaults were to triple from current levels, they would still represent a relatively small portion of total assets under management. What is changing is not the viability of the asset class, but the degree of differentiation between truly skilled managers and mediocre ones.

    Image of the credit cycle, highlighting expansion, downturn, repair, and recovery.

    Source: LPL Research 03/07/26

    Every cyclical credit downturn acts as a stress test. Managers who prioritized asset growth, overly concentrated in specific sectors, stretched covenants, or relied on optimistic refinancing assumptions will find the current environment less forgiving. By contrast, firms that maintain conservative leverage, disciplined underwriting, and robust downside protections are entering this phase from a position of strength. This will be especially relevant for vintages that originated in 2020 and 2021. Many of those loans are now approaching refinancing windows in a materially higher-rate world, compressing interest coverage ratios and exposing weaker capital structures. Yet this is precisely how cycles are supposed to work. Capital becomes scarcer, pricing power returns to lenders, and prudent risk management is rewarded.

    Private credit is unquestionably facing a more challenging operating environment than it has in years. But difficulty does not equate to dysfunction. In fact, the current backdrop is restoring many of the conditions long term investors should consider, including wider spreads, stronger lender protections, and fewer undisciplined competitors. In our view, opportunities will eventually emerge and disciplined managers will be there to take advantage of them in the repair and recovery stages. As financial history repeatedly demonstrates, cycles do not eliminate asset classes; they reset them, though past performance does not guarantee future results. For investors willing to be selective, patient, and cycle aware, private credit will be an asset class that is not defined by its recent stress, but by the managers who actually put processes in place that were built to perform across the full length of the credit cycle, not just the expansion.

    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: #1090486

  • Opportunities Ahead through the Volatility

    Long-Term Opportunities Always Present Themselves

    LPL Research
    Last Updated: April 08, 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.

    Early in my career, during a particularly challenging market environment, a mentor remarked that there are always opportunities — you simply have to look for them. That observation has remained a key tenet of my investment philosophy, particularly during periods of increased volatility.

    Market sell-offs are disruptive and often heighten investor uncertainty. We have recently experienced one of those periods because of the ongoing war in the Middle East. Oil prices have surged and the S&P 500, at its March lows, has declined 9% from its all-time high set in February.

    But improved market fundamentals might be creating some of those opportunities that tend to present themselves during periods like this one.

    Concerns About the Future Path of Economic Growth

    Expectations for the future path of the economy are a key driver of markets. Both higher and lower. Geopolitical risk has moved to the forefront of investors’ concerns and has become the key to that path. Prior to the beginning of this military action, news on the economy had some pluses and minuses. Economic growth remained positive. But there were certainly concerns about the future, with inflation remaining stubbornly elevated, and employment data coming in soft.

    Investors became concerned that the economy would struggle to weather the impact from surging oil and gasoline prices. But Friday’s March employment data was a positive surprise with 178,000 jobs created, which was well above economist expectations. And there is reason to believe that the economy could accelerate after a weaker fourth quarter gross domestic product (GDP) print. Stimulus from last year’s One Big Beautiful Bill Act should begin to flow through the economy in combination with ongoing spending on artificial intelligence infrastructure. In my view, it is likely that the Middle East war will not push the U.S. economy into a full-blown recession.

    While geopolitical risk dominates near-term headlines, valuation dynamics beneath the surface are telling a more constructive story.

    Valuations Improving Under the Surface

    The reason that the economic outlook is so important is because fundamentals drive markets over the long-term. But there are factors that investors should consider when making investment decisions today. The most important of which is valuations and earnings growth.

    Following the April 2025 market bottom, stocks rallied strongly into 2026. This left everyone feeling better about their portfolios. But it does come with consequences. As stocks went up, valuations increased. The multiple that investors were willing to pay for forward earnings for the S&P 500 peaked at 22x.

    Much like the rallies of the last few years being led by a handful of stocks, this year’s sell-off has seen similar action. The Magnificent Seven stocks (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla) are down 10% as of Friday’s close, while the other 493 stocks are basically flat. As a result, valuations have improved.

    S&P 500 Valuations Are Attractive

    This line chart provides S&P 500 valuations from 1996 to the present.

    Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management 04/02/26
    Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Forward P/E ratio is the most recent price divided by the consensus estimates for earnings provided by IBES since January 1996 and FactSet since January 2022. The remaining stocks represent the rest of the 490 stocks in the S&P 500, and their P/E ratio is calculated by backing out the nominal earnings and market cap of the top 10 from that of the S&P 500.

    The “S&P 500 Valuations Are Attractive” chart illustrates that the price-to-earnings (P/E) ratio for the full index is now under 20x, which is a more attractive level than a little over a month ago. Slicing the index a little differently, once we get past the names at the top of the index, the remaining 490 names are trading at just 18x earnings. Both levels are down from the beginning of the year.

    This improvement, in part, reflects multiple compressions among large cap leaders. So, while valuations are improving, relatively cheap is not an investment thesis by itself.

    Corporate America’s Outlook Is Improving

    But what makes relatively cheap an interesting investment opportunity is improving fundamentals. Valuations could be coming down because investors expect earnings expectations to be reduced due to the impact of higher energy prices on the profit and loss statement of companies that make up the index. It certainly would not be a surprise if that is what is happening since oil prices have risen over 70% since the end of February. But that is not what is going on.

    Earnings Estimates Are Actually Moving Higher

    This line chart provides the one-year earnings estimate.

    Sources: FactSet Research 04/02/26
    Disclosures: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

    Instead, the “Earnings Estimates Are Actually Moving Higher” chart indicates that there has been resilience in earnings expectations across the broader index. Earnings estimates have moved steadily higher over the course of March. The current estimate is now 2% higher than the February 27 FactSet estimate of $313.62. That is impressive in any environment, but a positive sign given the heightened level of geopolitical risk.

    While there are risks for corporate America to navigate over the rest of 2026, if analysts’ estimates are close to right, 2026 earnings growth would be 18%. This would be on the heels of 10% growth in 2024 and 11.5% growth in 2025. Corporate America is in solid shape currently.

    The final piece of the puzzle is figuring out what that means for portfolios.

    Navigating the Short Term and the Long Term

    While the situation in the Middle East remains fluid and until there is a resolution that opens the Strait of Hormuz that investors have confidence in, we would anticipate volatility to continue. For investors that can ignore the impact of short-term headlines, the equity market backdrop is improving.

    Sell-offs will happen each year, and when they do, if there is no lasting impact on economic growth, valuations become more attractive. This time, we see improving fundamentals through rising earnings estimates. The first quarter 2026 earnings season begins in earnest next week. There is certainly the possibility that companies will take the opportunity to tamper down the enthusiasm that is being seen in analysts’ expectations. But everyone thought that would happen last year due to tariffs, and companies handily beat estimates throughout the year.

    While near-term uncertainty is likely to persist, the combination of improving valuations and rising earnings expectations supports a constructive backdrop for the equity outlook. In our view, disciplined, diversified portfolios remain well positioned to navigate headwinds and participate in future market leadership.

    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: #1089845

  • Impacts of Risk-Off Rotations

    March Flows: Risk-Off Rotation Reshapes Portfolios

    Jeff Buchbinder | Chief Equity Strategist
    Last Updated: April 07, 2026

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

    With March and the first quarter (Q1) behind us, we conducted a deep dive into exchange-traded fund (ETF) flows over the month and year-to-date (YTD) periods. Flows measure the net movement of cash into and out of investment vehicles, such as mutual funds and ETFs. We analyzed flows to gain insight on investor demand and sentiment surrounding asset classes, sectors, and other segments of markets.

    Broad Asset Class Flows

    Global markets broadly sold off in March as mixed messaging around the escalating Iran war, coupled with the absence of a clear diplomatic off‑ramp and surging energy prices, reinforced risk‑off sentiment and stoked stagflation fears. The ETF market shrunk by a trillion dollars ($13.3 trillion vs. $14.3 trillion at the end of February), with equity ETFs seeing their asset base shrink the most. Despite the drawdown in performance, investors continued to pour into equity ETFs, which now represent 77% (~$10.3 trillion) of the total ETF market, experiencing a net flow of $63.6 billion, putting the YTD flows at $279 billion. Following the February rotation out of artificial intelligence (AI) stocks — which weighed on cyclical sectors such as information technology, communication services, and consumer discretionary — bearish sentiment spread to most other market sectors and foreign equities, with energy the notable exception as higher oil prices drove gains. Nonetheless, stocks continue to see strong flows, albeit across different asset classes than in the prior month.

    Following a strong 2025 in which the Bloomberg U.S. Aggregate Bond Index (AGG) rose 7.3%, fixed income saw meaningful flows in March at $47 billion, bringing the YTD total to $169 billion. Fixed income ETFs represent more than 18% ($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 (Treasuries, 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 by moving into the generally steadier, less volatile asset class.

    Across diversifying strategies, including commodities, alternative investments, currencies, and allocation ETFs, commodities saw a notable outflow in March, as precious metals, primarily gold and silver, sold off meaningfully. Gold is typically seen as a safe haven asset in times of geopolitical conflict; however, given the potential for higher inflation and interest rate hikes (though not our base case), bond yields spiked, leading investors to chase yield in another perceived safe haven asset. Treasuries — backed by the full faith and credit of the U.S. government and offering a steady income stream — appeared to many investors to present a more attractive risk-reward tradeoff than gold. In March, commodities realized an $11.2 billion outflow, with gold experiencing a larger withdrawal than the broad category, losing $12.9 billion. The other diversifying strategies (alternatives, currency, and asset allocation) all saw positive flows over the month, with alternatives gathering nearly $3 billion; currency strategies gaining nearly $2 billion; and asset allocation strategies a little over $1 billion.

    Flight to Safety: Fixed Income Narrows the Gap with Equities

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

    This bar graph displays the flows of equities, fixed income, commodities, alternatives, currencies, and asset allocations.

    Source: LPL Research, FactSet 03/31/26
    Disclosure: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

    Asset Class Specific Flows

    Equities

    Within equities, developed markets ex-U.S. was the largest equity segment by flows over the month, gathering over $7.2 billion in assets. While a smaller segment of the equity ETF market (3% of the 77%), investors continue to diversify outside of domestic stocks, with developed market equities appearing relatively insulated from the Iran war and offering stocks at a cheaper valuation. U.S. large cap equities — the largest ETF segment overall at $3.4 trillion — experienced some of the largest outflows in March, losing $2.2 billion in assets. While investors fled U.S. equities, domestic stocks remain one of the top categories in YTD flows, gathering $25.8 billion, making it the second-largest equity segment by flows after emerging market (EM) equities ($26.2 billion). EM equities also suffered outflows in March, as countries heavily dependent on oil that passes through the Strait of Hormuz — namely the two largest components of the MSCI EM Index, China and India — saw capital leave over the period. India had a particularly rough March, ranking as the seventh largest segment by outflows ($1.9 billion) representing nearly a tenth of the total AUM in the segment. Despite a weak March, EM remains the top segment of equity ETFs in 2026, continuing their impressive 2025 performance, where the MSCI EM index rose more than 30%.

    What’s notable about equities is the amount of capital flowing into non-U.S. equities. As previously mentioned, developed market ex-U.S. equities received the largest influx of capital over the month, but what’s also significant is the money that’s moved into the global ex-U.S. total market, developed market ex-North America total market growth, and global large cap segments, ranking fourth, sixth, and tenth, respectively, over the trailing one-month period. Despite a strong year for domestic stocks in 2025, with the S&P 500 up nearly 18%, investors continue to search for diversified return streams outside of the U.S., given domestic policy concerns, potential inflation, lower valuations, and heavy exposure to AI.

    At the other end of the spectrum are sector and industry specific ETFs, such as information technology and, within information technology, the semiconductor industry. Semiconductor ETFs experienced outflows in March as a combination of valuation concerns, positioning unwinding, and broader risk‑off dynamics prompted investors to lock in gains after a strong run. The information technology segment ranked as the third largest segment by outflows in March ($3.4 billion), flipping their flows from positive to negative in the YTD period ($2.6 billion). Information technology is the largest equity segment by outflows in 2026 thus far.

    Fixed Income

    In fixed income, the ultra-short Treasury segment realized the largest influx of capital in March at $22.9 billion, besting the next closest segment, developed markets ex-U.S. equities, by nearly $16 billion. Ultra-short Treasuries also rose to the highest rank in the YTD period, as the significant inflows in March catapulted this safe haven asset to the top spot. The meaningful amount of assets that poured into this segment highlights the bearish sentiment of investors, as ultra-short Treasury bonds are considered one of the safest asset classes in terms of historical risk-return within fixed income and also compared to traditional equities and other nontraditional diversifying strategies. Many investors chose to remain on the sidelines while awaiting greater clarity from the parties involved in the geopolitical conflict, rotating out of riskier asset classes such as equities and commodities in favor of safer, more defensive assets, like ultra-short bonds. In addition to ultra-short bonds, two other bond segments appeared in the top 10 segments by flows, namely investment grade bonds ($5.2 billion) and global broad market bonds ($4.2 billion), as investors chose to invest up in the quality spectrum and diversify regionally.

    Riskier sectors within fixed income markets, such as high-yield bonds and emerging market debt – non-native (or “hard”) currency, did not fare as well. These spread sectors tend to sell off in drawdowns as credit risk is generally higher in these categories relative to core sectors, like Treasuries and investment-grade corporate bonds. High-yield bonds lost $5 billion, while emerging market debt lost $1.8 billion. High-yield bonds are the top segment by outflows over the YTD period, as historically tight spreads and the relative risk-reward trade-off with core bonds hasn’t been worth the investment.

    Diversifying Strategies

    Across diversifying strategies, as noted earlier, gold is the clear loser, ranking first in terms of outflows in March ($13 billion), as investors ditched the yellow metal in favor of short-term Treasuries. Although gold is a much smaller segment of the broader ETF market (2.0%), it has consistently ranked in the top 10 segments by monthly flows as investors looked to diversify from traditional stocks and bonds. Silver ETFs also saw significant outflows, ranking fifth in terms of outflows over the month ($2.3 billion). Within commodities, broad market commodity ETFs, and those ETFs focused specifically on crude oil, saw significant flows as the price per barrel of oil rose sharply, crossing the psychological $100 / barrel threshold — a level not seen since 2022.

    While small in size (0.9%), alternatives broadly have seen positive flows, with downside risk mitigation ETFs, also referred to as “buffer” ETFs, becoming more popular among investors as they try to protect their portfolios from drawdown risk with heightened volatility. Additionally, traditional hedge fund strategies, such as global macro, event driven, and managed futures, which are now being offered in ETF vehicles (although with stringent restrictions to stay within regulatory compliance), continue to gain assets. Collectively, these alternative strategies can be seen as defensive positions that offer uncorrelated return streams to traditional equities and fixed income.

    Foreign Equities, Core Fixed Income Dominate YTD Flows

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

    This bar graph provides the year-to-date fund flows for a variety of asset classes.

    Source: LPL Research, FactSet 03/31/26
    Disclosures: Past performance is no guarantee of future results.

    Key Tactical Asset Allocation Takeaways

    When comparing the latest LPL Research Strategic and Tactical Asset Allocation Committee (STAAC) views with the March flows data, there are a number of similarities. The STAAC continues to like the top asset class by assets and third largest by 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 remains 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.

    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: #1088863

  • Weekly Market Commentary | Lessons from Past Conflicts and the Stock Market | April 06, 2026

    PRINTER FRIENDLY VERSION

    As strikes on Iran continue and the Strait of Hormuz remains effectively closed, it’s clearly too early for market watchers to stop thinking about geopolitical risk. As discussed in recent commentaries but worth repeating, history shows stocks often recover quickly from wars and other military engagements, especially when economies are resilient and earnings fundamentals remain strong. Improved valuations, the strong earnings outlook, and a still-normal level of volatility suggest the risk‑reward backdrop for stocks is getting more favorable. That said, we don’t have market capitulation signals flashing (washed-out selling), nor do we have any more clarity on how the Strait of Hormuz opens up. For now, we believe the best course of action for investors is to be patient and wait for a better entry point to add equity risk.

    Stocks Seem to Be Following the Playbook as History Doesn’t Repeat but Often Rhymes

    As we wrote about in our March 9 Weekly Market Commentary, stocks have historically been resilient to geopolitical shocks. In the “Stocks Have Historically Been Resilient to Military Conflicts” chart, we focus just on wars and significant military operations to get a more comparable set of events than the broader list we published last month. As the accompanying chart illustrates, even in the face of these more serious and longer-lasting events, the stock market has demonstrated impressive resilience — on average, the S&P 500 draws down 7% and recovers losses within an average of 55 days, or less than two months.

    While the latest headlines and commentary from the White House suggest the conflict will be over within the next few weeks, which helped drive stocks higher early last week, disruptions to oil tankers and other shipments through the Strait of Hormuz cannot be ruled out, nor can the risk of further damage to energy facilities or other infrastructure in neighboring Gulf countries. In the event of a ceasefire that opens the Strait of Hormuz, we would expect oil prices to come down. But the price floor is likely higher than February levels in the $50s given what we’ve seen from the Iranian regime. On top of that, how long a possible détente might last — if we get one — remains an open question.

    Bottom line, we believe history suggests that it’s quite possible that the 9% peak-to-trough drawdown in the S&P 500 reached in March may be all we get during this conflict. Market watchers may not have to wait too long for stocks to recover from year-to-date losses. At the same time, geopolitical uncertainty remains high enough to warrant patience and leave us comfortable recommending portfolio risk at or slightly below benchmarks currently, although past performance does not guarantee future results.

    Impressive Stock Market Resilience Historically During Significant Military Conflicts

    Source: LPL Research, Bloomberg, CFRA, Strategas, 03/31/26
    Disclosure: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Events not labeled include Hungarian uprising (’56), Suez crisis (’56), Gulf of Tonkin Incident (’64), Six-Day War (’67), Yom Kippur War (’73), Israel-Hamas War (’23), U.S.-Israeli Airstrikes of Iran Nuclear Sites (’25). 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.

    Putting the Middle East aside for a moment, we also want to reiterate that this level of volatility is completely normal. Regular readers may think we sound like a broken record, but we cannot overstate the importance of this point. As we wrote in our March 31 LPL Research blog, the average S&P 500 maximum annual drawdown is 14%, while the average annual gain for the S&P 500 is 10%. The drawdown of just 9% this year is well within the normal range and does not diminish our confidence that the broad market will end higher in 2026.

    Of course, nothing is guaranteed. The risk of lasting disruption to energy production, transportation, or other critical assets in the region is real. Still, history suggests the risk-reward trade-off for stocks in the intermediate to longer term has become more favorable.

    Earnings Still Drive Stock Prices

    Some may be surprised by the stock market’s relative resilience during this conflict given the surge in oil prices. Expectations from markets and the Trump administration that the military operation will be over this month is certainly part of that resilience. U.S. energy independence is part of it as well. But if there is one reason stocks have held up well so far — and hopefully continue to do so — it is the strong earnings outlook, even in the face of higher oil prices and rising interest rates.

    A dampened outlook for companies that are obviously hurt by high oil prices, such as airlines and cruise ship operators, has been more than offset by improving outlooks for earnings from technology companies, largely immune to the conflict, and U.S. energy companies, of course, which benefit. In fact, the consensus estimate for technology sector earnings per share (EPS) in 2026 has risen 6% over the last 30 days, while the consensus energy EPS estimate jumped 18%.

    We wrote about earnings in the March 30 Weekly Market Commentary, so we won’t go too deep into the topic here. However, we do think it’s worth highlighting that stocks have a strong track record of gains when earnings grow double digits, as they are likely to in 2026. Although companies will probably talk expectations down during first quarter earnings conference calls given the complicated and dynamic macroeconomic and geopolitical backdrop, we still believe fundamentals support double-digit growth in S&P 500 EPS in 2026. As the accompanying figure illustrates, over a one-year time horizon, strong earnings growth may be accompanied by higher stock prices.

    Over the last 30 years the only exceptions were 2000, when stocks were pricing in a bursting internet bubble before earnings fell, and 2018, when concerns about a Federal Reserve policy mistake drove a sharp correction beginning in early December of that year. Those fears quickly eased in 2019 as the S&P 500 went on to gain 30% that year.

    Double-Digit Earnings Growth Tends to Be Accompanied By Stock Market Gains

    Source: LPL Research, Bloomberg 03/31/26
    Disclosure: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. 2003 was omitted as an outlier observation with annual earnings per share growth of 362.3% and an annual total return of 28.7%. Thank you to Evercore ISI’s equity strategy team for this concept.

    Valuations Have Improved

    The benefit of stock market declines is that it gives investors an opportunity to buy stocks at lower valuations, assuming earnings hold up. That’s what seems to have happened. Since the conflict began on the last day of February, the S&P 500 has dropped about 4% and the consensus S&P 500 EPS estimate for 2026 has increased 2.5% (from roughly $310 to $317). We wouldn’t argue stocks are cheap, but when the Middle East calms down we see an opportunity for a higher price-to-earnings ratio. Our year-end fair value target range for the S&P 500, at 7,300 to 7,400, is based on a price-to-earnings ratio of 23 and our 2027 S&P 500 EPS estimate of $320.

    Stock Market Pullback as Earnings Estimates Rose Has Lowered Valuations

    Source: LPL Research, Bloomberg 04/01/26
    Disclosure: All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not materialize as predicted and are subject to change.

    Technical Analysis Take: What We Are Watching

    After five consecutive weeks of selling pressure, buyers stepped back into the market last week, lifting the S&P 500 above key support from the November lows at 6,522. While this is a constructive development, the 200-day moving average (dma) at 6,644 looms as the next critical test for bulls. A sustained move above this level would reverse the short-term downtrend that has been in place since February and increase confidence that the pullback has run its course.

    Beyond price action, we are also watching for cyclical sectors to reclaim leadership from defensives and for market breadth to expand toward bullish territory, both important signals of improving risk appetite. Failure at the 200-dma, however, would raise the likelihood of further downside risk, potentially toward support near the February 2025 highs at 6,144. In that scenario, we would want to see clearer signs of capitulation, including more deeply oversold conditions and investor positioning consistent with historical inflection points, evidence that has thus far been largely absent.

    Beyond equities, macro conditions remain a key constraint on the market’s ability to regain momentum. The front end of the Treasury curve points to the risk of a higher-for-longer monetary policy backdrop, while the technical setup for longer-dated yields suggests there is still upside risk. At the same time, oil market volatility remains elevated, Brent crude has yet to decisively break below meaningful support, and breakeven inflation rates are beginning to price in some stagflation concerns.

    Against this more challenging macro and technical backdrop, it is important to keep recent price action in perspective. Drawdowns are not anomalies in bull markets but a normal and recurring feature of market behavior. Outside of periods when equities are making new all-time highs, the market is almost always experiencing some degree of pullback. Since 1950, on a calendar year basis, the S&P 500 has spent nearly 70% of all trading days in a drawdown of up to 5%, and roughly 18% of trading days in the 5% to 10% range. More severe drawdowns are rare, with 15% or larger pullbacks occurring in only about 6% of trading days. Rather than signaling the end of a bull market cycle, these bouts of volatility have often created opportunities for investors, particularly when the longer-term uptrend for the S&P 500 remains intact, as it is now.

    Conclusion

    March’s volatility has been uncomfortable but not unusual. While stocks have faced a challenging mix of geopolitical risk, higher oil prices, and interest‑rate volatility, history reflects market resilience, especially when economic fundamentals remain intact. The comparison with prior conflicts reinforces that distinction. The 2003 Iraq War illustrates how markets can recover swiftly when earnings are improving, policy is supportive, and oil price spikes are contained.

    Earnings continue to provide support for stocks during this volatile period. Consensus expectations for double‑digit S&P 500 EPS growth in 2026 have not only held firm, but they have improved despite recent market stresses, resulting in more reasonable valuations and pointing toward gains for stocks in 2026.

    This does not mean risks have disappeared. Further disruption to energy infrastructure or shipping routes could prolong uncertainty and drive market volatility. However, based on historical precedent, the current risk‑reward backdrop over the medium-to-longer term appears favorable.

    After five weeks of selling pressure, it was encouraging to see some buyers step in last week, pushing the S&P 500 back above key November support. The next test is a sustained break above the 200‑day average. We’re watching for cyclical leadership, improving breadth, and clearer capitulation signals for a potential attractive opportunity to add equities to move to an overweight position.

    Asset Allocation Insights

    LPL’s Strategic Tactical Asset Allocation Committee (STAAC) maintains its tactical neutral stance on equities. As the war in Iran continues with an off ramp not yet in view, investors may be well served by bracing for additional volatility. The stock market’s resilient track record during geopolitical crises is reassuring, leaving STAAC to look for opportunities to potentially add equities.

    STAAC’s regional preferences across the U.S., developed international, and emerging markets (EM) are aligned with benchmarks. Attractive valuations in non-U.S. equities are offset by upward pressure in the U.S. dollar and dependence on oil and gas through the Strait of Hormuz, although the Committee continues to watch EM closely for potential opportunities after relative calm is restored in the Middle East.

    The Committee maintains a slight preference for growth over value and large caps over small caps. In terms of domestic sectors, communication services and industrials remain overweight while the Committee continues to debate technology as a potential upgrade candidate given the still-strong earnings outlook and more attractive valuations.

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

    Adam Turnquist, Chief Technical Strategist, LPL Financial

    Jeffrey Buchbinder, Chief Equity Strategist, LPL Financial

    Disclosures

    This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. ​

    References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. ​

    Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. ​

    All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. ​

    All investing involves risk, including possible loss of principal. ​

    US Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. ​

    The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

    The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio. ​

    Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio. ​

    Precious metal investing involves greater fluctuation and potential for losses.

    The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.​

    The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Indexes are unmanaged and cannot be invested in directly.

    The MSCI US Broad Market Index captures broad U.S. equity coverage. The index includes 3,204 constituents across large, mid, small and micro capitalizations, about 99% of the U.S. equity universe. Indexes are unmanaged and cannot be invested in directly.

    Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Private credit carries certain risks — illiquidity, opacity, borrower concentration, and bespoke structures — that distinguish it from corporate bonds and bank loans and complicate its evaluation and oversight.

    All index data from FactSet or Bloomberg.

    This research material has been prepared by LPL Financial LLC.

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

    RES-0006894-0326 | For Public Use | Tracking #1088174  (Exp. 04/2027)

  • Weekly Market Performance | April 2, 2026

    LPL Research
    Last Updated: April 02, 2026

    LPL Financial and the stock market will be closed on Friday, April 3 for the Good Friday holiday.

    LPL Research provides its Weekly Market Performance for the week of March 30, 2026. U.S. equities rallied during the holiday-shortened week, snapping a multi-week losing streak as easing Treasury yields, quarter end rebalancing, and hopes for a de-escalation in the U.S.–Iran conflict supported risk assets, with the Nasdaq outperforming on strength in large cap technology. Internationally, European stocks advanced on improved risk sentiment and cooler inflation data, while Asian markets were mostly weaker. Core bonds posted gains as Treasury yields pulled back on more dovish rate expectations pricing. Crude prices continued to trend higher as the conflict in Iran continued, while the U.S. dollar traded modestly lower amid volatile headlines.

    Stock Index Performance

    Index Week-Ending One Month Year to Date
    S&P 500 3.18% -4.51% -4.01%
    Dow Jones Industrial 2.85% -5.01% -3.35%
    Nasdaq Composite 4.14% -4.10% -6.13%
    Russell 2000 3.07% -4.93% 1.73%
    MSCI EAFE 4.47% -5.14% 2.05%
    MSCI EM 2.48% -8.02% 3.40%

    S&P 500 Index Sectors

    Sector Week-Ending One Month Year to Date
    Materials 3.26% -5.73% 10.42%
    Utilities 1.23% -2.02% 8.22%
    Industrials 2.84% -8.31% 5.60%
    Consumer Staples 0.43% -6.61% 6.84%
    Real Estate 3.63% -5.21% 3.70%
    Health Care 2.20% -7.42% -5.39%
    Financials 3.47% -3.21% -9.61%
    Consumer Discretionary 2.51% -5.47% -10.07%
    Information Technology 4.30% -3.23% -7.83%
    Communication Services 6.14% -5.52% -5.92%
    Energy -5.35% 4.47% 32.50%

    Fixed Income and Commodities

    Indexes and Commodities Week-Ending One Month Year to Date
    Bloomberg U.S. Aggregate 0.77% -1.32% -0.03%
    Bloomberg Credit 1.03% -1.44% -0.41%
    Bloomberg Munis 0.63% -1.88% 0.05%
    Bloomberg High Yield 1.19% -0.71% -0.12%
    Oil 11.41% 55.85% 93.33%
    Natural Gas -9.56% -5.44% -24.06%
    Gold 3.94% -12.23% 8.14%
    Silver 4.16% -18.70% 1.40%

    Source: LPL Research, Bloomberg 4/2/26 @3:16 p.m. ET
    Disclosures: Indexes are unmanaged and cannot be invested in directly.

    U.S. and International Equities

    U.S. Equities: Despite capping a down month and the first quarterly loss over the last four, the S&P 500 snapped a five-week losing streak, posting a healthy four-day advance over the holiday shortened week.  After rate-sensitive trading on Monday sent equities lower alongside Treasury yields, following calming remarks from Federal Reserve (Fed) Chair Powell, major averages delivered a stout two-day relief rally on optimism around U.S.-Iran offramps. Fueling the surge was reports that President Trump told aides he is willing to end hostilities in Iran should the Strait of Hormuz be re-opened, with separate reports later indicating that Iranian President Pezeshkian stated he is ready to end the war accelerating gains. Improved market positioning, month- and quarter-end rebalancing dynamics, and mostly higher big tech names also broadly padded gains helping lift the Nasdaq a bit more than the S&P 500. The abbreviated week ended on a mixed note, as stocks pared early Thursday losses on a report that Iran is drafting a protocol with Oman to monitor traffic through the Strait of Hormuz after President Trump threatened potentially intensifying attacks over the last few weeks of the conflict. While remaining lower on the day, the development was seen as a step in the right direction by investors given the reversal of a 1.5% loss in the S&P 500.

    International Equities: European equities also advanced through Thursday trading. Utilities and basic resources industry groups led the charge with the latter receiving support from metals and mining names on the prospect for record aluminum prices following Iranian strikes on aluminum plants in Bahrain and the UAE, threatening a supply strain. Risk appetite was lifted on hopes of a ceasefire in the Mideast, with sentiment further buoyed by hopes that price pressures may be less than initially feared following a slightly cooler than expected preliminary consumer inflation report for March. After recent outperformance, energy shares were relative underperformers with the lion’s share of gains arriving on Thursday as crude prices turned higher.

    On the other side of the coin, major Asian markets traded mostly lower heading into the first Friday of the month. South Korea remained a standout as the KOSPI remained highly sensitive to the vast swings in geopolitical headlines, with some downward pressure to start the week also stemming from pension authorities warning over the need to stabilize the won. Chipmakers were also a weak spot, with a similar dynamic weighing on Taiwan, while Japanese benchmarks also dropped on raised fiscal jitters from recent yen weakness, firmer crude prices, and central bank minutes discussing more rate hikes. Greater China continued to display some relative insulation to geopolitical worries as Hong Kong moved higher while mainland losses were subdued as Hong Kong moved higher while mainland losses were subdued.

    Fixed Income, Currency, and Commodity Markets

    Fixed Income: Core bonds, measured by the Bloomberg Aggregate Index, traded higher on the week heading into Friday’s abbreviated session. The Treasury market enjoyed some upside this week as bonds rallied alongside equity markets on hopes that an end to U.S.-Iran hostilities is around the corner. Yields pulled back as traders began to re-price a chance of a Fed rate cut in 2026 — or more likely a hold which is still more dovish than a rate hike — and continued to fall on Thursday despite speculation that elevated oil prices could stick around after Wednesday’s Presidential address.

    More broadly in fixed income markets, the ongoing conflict in Iran has pushed global bond yields higher in March, weighing on the national municipal market as well. While March is typically a challenging month for munis — the average return over the past 10 years is ‑0.32% — last month’s ‑2.5% decline was the worst March performance since March 2022, which coincided with the most aggressive Fed tightening cycle in decades. It was also the worst monthly return since September 2023, with negative returns broad‑based across credit quality. With the drawdown, however, valuations have improved meaningfully and relative value versus Treasuries and taxable corporates has also improved, making munis competitive for investors with marginal tax rates as low as roughly 29%.

    One caveat: April has historically been a difficult seasonal month for munis, with six of the past 10 Aprils producing negative returns and an average return of ‑0.40% over the past decade. Elevated supply, weak reinvestment flows, and tax‑related redemptions tend to pressure the market during this period. Nonetheless, value has returned to the municipal market, particularly in the intermediate portion of the curve.

    Commodities and Currencies: The broader commodities complex was poised for a weekly advance Thursday afternoon as crude oil prices continued to march higher as April begins. Despite relatively rangebound trading, and even dipping lower on Wednesday, West Texas Intermediate (WTI) crude prices soared back into positive territory Thursday after President Trump’s primetime address from Pennsylvania Avenue disappointed investors by not providing a clear resolution timeline on the conflict in Iran or when the Strait of Hormuz will reopen, remarking that attacks may escalate as the U.S. campaign nears its end.  WTI remained near weekly highs despite the reports that Iran is working with Oman on a protocol to monitor traffic through the waterway. Elsewhere, gold prices continued to bounce off key technical levels reached last week, adding over 3% through Thursday afternoon trading, while silver also gained ground.  In currencies, the U.S. Dollar Index faced choppy trading amid volatile geopolitical headlines, rate expectations, and economic outlooks, ultimately trading slightly lower but still hovering near 100.

    Economic Weekly Roundup

    Tuesday’s release of the JOLTS jobs report indicated hiring and job openings fell but, not across all sectors. Data from the Bureau of Labor Statistics suggested the quits rate and hiring rate fell in February as the labor market cooled from the headwinds of inflation and tariff uncertainty. We won’t see the potential impact of Operation Epic Fury until next month. Across most industries, the February quits rate is below pre-pandemic levels, indicating workers’ uncertainty within the job market. On the other side of the equation, we see hiring rates have also weakened, particularly in healthcare services. This is important given the driving force in payrolls recently. Expect weakness in Friday’s nonfarm payroll report within cyclicals like retail trade and construction. But it’s not all bad news. In contrast, hiring rates (a signal from firms) and quit rates (a signal from workers) rose in the information technology space. Product demand is supportive of a decent job market for this industry.

    For many workers, the uncertainty within the job market has suppressed the desire to move from one job to another. On the labor demand side, firms have pulled back on hiring rates. The one anomaly is within the information technology sector as solid labor demand has bucked the trend.

    The Week Ahead

    The following economic data is slated for the week ahead:

    • Monday: ISM Services Index (Mar)
    • Tuesday: ADP Weekly Employment Change (Mar 21), Durable Goods Orders (Feb preliminary), Capital Goods Orders and Shipments (Feb preliminary), New York Fed One-Year Inflation Expectations (Mar), Consumer Credit (Feb)
    • Wednesday: MBA Mortgage Applications (Apr 3), FOMC Meeting Minutes (Mar 18)
    • Thursday: Personal Income and Spending (Feb), Headline and Core PCE Price Index (Feb), Initial Jobless Claims (Apr 4), Continuing Claims (Mar 28), GDP (4Q third reading), Personal Consumption (4Q third reading), Core PCE Price Index (4Q third reading), Wholesale Inventories (Feb final), Wholesale Trade Sales (Feb)
    • Friday: Headline and Core CPI (Mar), Real Average Hourly Earnings (Mar), Real Average Weekly Earnings (Mar), Factory Orders (Feb), University of Michigan Consumer Sentiment Report (Apr preliminary), Durable Goods Orders (Feb final), Capital Goods Orders and Shipments (Feb final)

    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: #1087893

  • A Review of Active Management

    Where Has Active Management Shined and Struggled?

    Derek Beiter | Senior Investment Analyst
    Last Updated: April 01, 2026

    LPL Research periodically conducts a detailed study that examines when and where active management has performed well. Our data includes actively-managed mutual funds across a variety of asset categories, going back 20 years. We assess active management using a variety of criteria. Here we present what we believe are two essential and complementary criteria: excess returns and batting averages. For excess returns, we take the return of each fund and subtract the returns for the benchmark we designate for that asset class. Pardon the baseball reference, but batting average simply means the percentage of funds that outperformed the benchmark designated for the asset class.

    While we are eager to present our results, let us first point out some careful details we undertake.

    • To have fair comparisons, funds were measured against appropriate benchmarks. For example, small value funds were measured against the Russell 2000 Value Index.
    • We break the 20-year period into smaller three-year chunks, overlapping “rolling-periods,” to help us measure consistency and how performance has changed over time.
    • Where possible, we included the returns of funds that no longer exist. This helps adjust for survivorship bias, the idea that worse-performing funds may get liquidated or merged into other funds, artificially inflating the return of the “average fund.”
    • Since we are interested in studying the effectiveness of active management, we excluded index funds.
    • We focused on institutional share classes, the type of shares commonly used in advisory programs.

    Without further ado, below, we rank each asset class from best to worst based on the funds’ excess returns compared to the designated benchmark. The three asset classes where active management was generally more successful included Long-term Bonds, Global Bonds, and Short-term Bonds. Meanwhile, Large Blend, Mid Blend, and Large Growth were asset classes where active management generally underperformed. The number of individual funds in each category range from 50 to 300.

    Active Funds’ Excess Returns Versus Benchmarks

    Fund Average Annualized Excess Return
    Long-Term Bond 0.60
    Global Bond 0.51
    Short-Term Bond 0.46
    Foreign Large Value 0.33
    Intermediate Core-Plus Bond 0.29
    Foreign Large Growth 0.27
    Global Bond-USD Hedged 0.26
    Small Value 0.16
    Large Value 0.10
    Intermediate Core Bond 0.08
    Foreign Large Blend 0.06
    Long Municipals -0.01
    Small Growth -0.19
    Short-Term Municipals -0.19
    Intermediate Municipals -0.36
    Diversified Emerging Markets -0.38
    Small Blend -0.40
    Emerging Markets Bond -0.40
    Mid-Cap Value -0.43
    Real Estate -0.49
    Mid-Cap Growth -0.78
    High Yield Municipals -0.93
    High Yield Bond -1.02
    Large Blend -1.03
    Mid-Cap Blend -1.31
    Large Growth -1.58

    Source: LPL Research, FacSet 12/31/25

    Next, we rank each asset class from best to worst based on batting averages – the percentage of funds in that asset class that outperformed – it is actually an average of 3-year rolling periods over the last 20 years. A relatively higher percentage of active managers outperformed benchmarks within Short-term Bonds, Long-term Bonds, and Intermediate Core-Plus Bonds. Meanwhile, High Yield Municipals, Large Growth, and High Yield Bonds were places where fewer active managers outperformed.

    Percent of Active Funds that Outperformed Benchmarks (Average of 3-Year Periods)

    Fund Average Annualized Excess Return
    Short-Term Bond 72%
    Long-Term Bond 71%
    Intermediate Core-Plus Bond 62%
    Intermediate Core Bond 61%
    Global Bond-USD Hedged 60%
    Foreign Large Value 59%
    Long Municipals 58%
    Small Value 57%
    Global Bond 56%
    Large Value 54%
    Small Blend 53%
    Foreign Large Blend 51%
    Foreign Large Growth 51%
    Small Growth 51%
    Diversified Emerging Markets 48%
    Municipal National Intermediate 44%
    Mid-Cap Value 44%
    Real Estate 42%
    Short-Term Municipals 42%
    Emerging Markets Bond 42%
    Mid-Cap Growth 39%
    Large Blend 35%
    Mid-Cap Blend 34%
    High Yield Municipal 29%
    Large Growth 27%
    High Yield Bond 26%

    Source: LPL Research, FactSet 12/31/25

    The results based on the two methods generally line up fairly closely. In cases where more than 50% of actively managed funds outperformed, the excess return of the average fund was generally positive as well. There were only three cases where batting averages were above 50% but excess returns were negative, including Small Blend, Small Growth, and Long Municipals.

    Recent Trends in Batting Averages

    • 3-year batting averages for small- and mid-cap active managers declined for year-end 2025 as compared to year-end 2024. This coincided with a sharply advancing equity market in 2025, and one in which higher-risk stocks generally outperformed. Our research suggests that active managers tend to outperform their benchmarks more readily in down markets, while they often struggle in sharply advancing markets. Many small cap active managers position their portfolios with higher quality and lower risk than the benchmarks, which can prevent them from keeping pace during sharply advancing markets.
    • Many fixed-income asset classes had improvements in their 3-year active manager batting averages in 2025 as compared to 2024, including Long Municipals, Intermediate Municipals, Intermediate Core-Plus Bonds, and Short-Term Bonds.

    Broader Observations

    • Taxable fixed income asset classes have historically been some of the best for active management relative performance. This may reflect the many varied decisions active managers are able to make, such as which sectors and maturities to emphasize, in addition to security selection.
    • Active management has generally been more favorable in small caps as compared to large-and mid-caps. Within small caps, there are a greater number of companies available for active managers to scour for opportunities. Additionally, smaller companies may be less well covered and understood by market participants, creating more opportunities for active managers putting in the leg work.
    • Within large-cap, small-cap, and foreign equities, active managers of value-style equities have generally outperformed their value benchmarks more readily than growth managers have outperformed their growth benchmarks. Domestically, this may be a reflection of the strong long-term index performance in the growth benchmarks that has been difficult for active managers to outpace.

    How Does This Apply to Portfolios We Manage?

    LPL Research manages a variety of Active-Passive portfolios that include both actively-managed and passively-managed investments. Our Active-Passive framework allows us to generally tilt toward active management in the asset classes where our research suggests it may have greater potential for outperformance. Excess returns and batting averages are two of the many quantitative factors we evaluate. We also consider softer, hard-to-quantify criteria that may impact the results of active managers. For example, we believe the below asset classes may be more favorable for active managers than historical data suggests.

    • Diversified Emerging Markets. Active managers can make judgments about geopolitical risks in emerging markets, whereas passive funds must stick with benchmark weightings despite any negative impacts. Emerging market indices can also become concentrated in certain countries or sectors, making the performance of passive funds heavily dependent upon these exposures.
    • High Yield Bonds. The high yield indices often tilt towards the largest issuers and most liquid securities, and passive funds must invest accordingly, regardless of increased risks or forgone opportunities. Additionally, passively-managed high yield funds, in certain time periods, have struggled to match the returns of the benchmark index.
    • Long-term Municipals and High Yield Municipals. Passively-managed funds in these categories, in certain time periods, have struggled to match the returns of the benchmark index. We also believe that inefficiencies in the municipal market may be more plentiful in longer-maturity and lower-quality bonds, allowing active managers to potentially add yield to their portfolios while proactively monitoring risk.

     

     

     

    Benchmark Disclosures:

    Asset Class LPL Research Assigned Benchmark
    Diversified Emerging Mkts MSCI EMF (Emerging Markets) – Net Return
    Emerging Markets Bond Bloomberg EM USD Aggregate TR USD
    Foreign Large Blend MSCI EAFE – Net Return
    Foreign Large Growth MSCI Growth EAFE – Net Return
    Foreign Large Value MSCI EAFE Value- Net Return
    Global Bond Bloomberg Global Aggregate TR
    Global Bond-USD Hedged Bloomberg Global Aggregate TR Hedged
    High Yield Bond Bloomberg Barclays US Aggregate Credit – Corporate – High Yield
    High Yield Muni Bloomberg HY Muni Index
    Intermediate Core Bond Bloomberg Barclays US Aggregate
    Intermediate Core-Plus Bond Bloomberg Barclays US Universal TR
    Intermediate Municipals Bloomberg Barclays Municipal Bond 7 Year
    Large Blend Russell 1000 – Total Return
    Large Growth Russell 1000 Growth – Total Return
    Large Value Russell 1000 Value – Total Return
    Long Municipals Bloomberg Barclays Municipal Bond
    Long-Term Bond Bloomberg Barclays Govt Credit Long
    Mid-Cap Blend Russell Midcap – Total Return
    Mid-Cap Growth Russell Midcap Growth – Total Return
    Mid-Cap Value Russell Midcap Value – Total Return
    Real Estate Nareit Equity Index – Total return
    Short-Term Bond Bloomberg Barclays US Aggregate Government & Credit (1-3 Y)
    Short-term Municipals Bloomberg Muni Bond 3 Year TR
    Small Blend Russell 2000 – Total Return
    Small Growth Russell 2000 Growth – Total Return
    Small Value Russell 2000 Value – Total Return

     

    Disclosure: LPL Research assigns each asset class a benchmark, above are asset classes and their corresponding LPL Research assigned benchmark. 

    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: #1087045

  • Technical Perspective on the Current Drawdown

    Adam Turnquist | Chief Technical Strategist
    Last Updated: March 31, 2026

    As the first quarter comes to a close, it’s clear that equity markets have endured a difficult stretch. The strong momentum that drove a record‑setting rally early in the year faded quickly as concerns over artificial intelligence (AI) spending and disruption dampened risk appetite. The outbreak of the Iran war in late February added new challenges, as the essential closure of the Strait of Hormuz underpinned an unprecedented supply shock in oil that quickly drove prices to multi-year highs. Inflation fears promptly followed, and the market drastically repriced global monetary policy expectations to a higher-for-longer regime, with growing probabilities for tightening among major central banks (including the Federal Reserve).

    With markets now hinging on when the U.S.‑Iran conflict might be resolved and when the Strait will fully reopen, uncertainty remains the dominant force. The longer the conflict persists, the greater the potential strain on global growth, inflation, interest rates, earnings, profit margins, and ultimately equity markets.

    Stocks have struggled against this challenging backdrop. The S&P 500 posted its fifth straight weekly decline last week and is now inching toward correction territory, technically defined by a drawdown of 10–20%. Technical damage has been significant as the index broke below its closely watched 200-day moving average (dma) and the November lows at 6,522. This leaves 6,174 (a key Fibonacci retracement level of the April–January advance) and the February highs at 6,144 as the next major downside support levels to watch.

    The consistent pattern of lower highs and lower lows over the past two months has turned near-term momentum gauges bearish. Although oversold conditions are starting to emerge, most indicators have yet to reach the extreme levels that typically signal contrarian buying opportunities. For instance, only about 11% of S&P 500 stocks registered oversold Relative Strength Index (RSI) readings on Friday, well below the +50% seen last April or the +20% levels observed during previous market corrections in recent years.

    Selling pressure has also been widespread, and market internals continue to deteriorate. Only 43% of S&P 500 constituents remain above support from their November lows, with a similar share still holding above their 200-dma. Breadth composition is also concerning, as defensive sectors have taken leadership. Technology, the market’s largest weight, has rolled over, while financials and consumer discretionary sit among the weakest areas in our technical work. A durable recovery will require renewed risk appetite across these sectors, along with meaningful technical improvements.

    Technical Deterioration Points to Near-Term Downside Risk

    This line chart provides the performance of S&P 500 and the percentage of members with an RSI over 30.

    Source: LPL Research, Bloomberg 03/30/26
    Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.

    Historical Perspective

    Taking a step back to a longer‑term (and more encouraging) perspective, the secular uptrend supporting this bull market remains firmly in place. History also offers reassurance when it comes to geopolitical shocks. As we noted in our March 9 Weekly Market Commentary (Markets Tested as Iran Conflict Continues), “The stock market has demonstrated remarkable resilience in the face of major geopolitical shocks in the past.” Our analysis of more than 80 years of market reactions to 26 distinct geopolitical events shows that the S&P 500 has historically gained an average of 7.8% in the 12 months following such events and finished higher 68% of the time, although past performance does not guarantee future results.

    Although drawdowns can feel uncomfortable, particularly following the low‑volatility environment that characterized the start of the year, they should not catch investors off guard. Over the past 75 years, the S&P 500’s average peak‑to‑trough intra‑year pullback has been ‑13.7%. More importantly, despite these declines, the index has delivered an average annual price gain of 9.6%, with positive returns in 74% of those years. As illustrated in the “Bull Markets Are Not Linear” chart, even sizable drawdowns have not necessarily translated to down years. Last year serves as a clear example: equity markets fell nearly 20% in April amid tariff‑related concerns, but as those fears eased and trade policy softened, investor focus shifted back to fundamentals like earnings and economic growth, which helped drive a strong recovery.

    Bull Markets Are Not Linear

    This bar graph highlights the S&P 500 annual price returns and maximum drawdowns.

    Source: LPL Research, Bloomberg 03/30/26
    Disclosures: Past performance is no guarantee of future results. All indexes are unmanaged and can’t be invested in directly. 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.

    Frequency of Drawdowns

    A bull market can sometimes cause investors to forget that drawdowns are not anomalies, they are a normal and frequent part of market behavior. Outside of periods when stocks are setting new record highs, the market is almost always experiencing some degree of pullback. Historically, on a calendar‑year basis, the S&P 500 has spent nearly 70% of trading days in a drawdown of up to 5% and roughly 18% of trading days in a 5–10% drawdown range. Investors may find it reassuring that deeper declines are far less common, as illustrated in the “Drawdowns Should Be Expected” chart.

    Drawdowns Should Be Expected

    This bar graph displays the annual S&P 500 drawdown frequency distribution.

    Source: LPL Research, Bloomberg 03/30/26
    Disclosures: Past performance is no guarantee of future results. All indexes are unmanaged and can’t be invested in directly.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.

    Conclusion

    Equity markets continue to grapple with mounting near‑term pressures and technical conditions have undeniably weakened. The recent supply‑driven spike in oil prices, rising inflation concerns, and geopolitical uncertainty have all contributed to growing downside risk over the weeks ahead. These forces may keep volatility elevated and leave markets vulnerable to additional corrective price action in the short run.

    However, it’s equally important to recognize that the longer‑term backdrop has not fundamentally changed. The secular uptrend supporting this bull market is still intact, and history demonstrates that periodic drawdowns are a routine feature of equity markets rather than a clear signal of imminent long-term destruction. As highlighted earlier, the S&P 500 has spent the vast majority of its trading history in some degree of drawdown, with sizable peak‑to‑trough declines occurring even in years that ultimately delivered strong positive returns. This perspective reinforces the idea that short‑term weakness can coexist with resilient long‑term trends. Please note that past performance does not guarantee future results.

    In our view, as long as fundamentals remain reasonably solid and the technical foundation of the longer‑term trend holds, periods of market stress should be viewed through a measured lens. Near‑term downside risks have increased, but the longer‑term technical and fundamental backdrop provide an encouraging counterbalance, in our view.

    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: #1086293

  • Weekly Market Commentary | Earnings Season Outlook: Will Markets Care? | March 30, 2026

    Earnings Likely to Grow Double-Digits Again; Will Markets Care?

    PRINTER FRIENDLY VERSION

    Earnings drive stock prices over time, but not all the time. Clearly, we’re in an environment where stocks are moving on developments in the Mideast and related moves in oil prices and interest rates. At the risk of writing about something that markets may not care much about right now, here we share some thoughts on the upcoming earnings season and the earnings outlook for the rest of the year.

    Despite the sharp rise in oil prices and interest rates in March, our expectation is that the upcoming earnings season will be solid. While companies with business models sensitive to oil and rates may strike a more cautious tone in their outlooks, we expect to again be impressed by the resilience of corporate America, bolstered by our energy independence.

    Our confidence in the earnings outlook for 2026 has not wavered, and future earnings are available to investors at a discounted price following the stock market pullback. While today may not mark the stock market low, and our technical analysis work points to heightened risk of some additional near-term downside, our belief that 2026 will be a good year for stocks on the back of solid economic growth and strong earnings has not changed. Once a path to ending the conflict becomes clear and oil and interest rates come back down, stocks should get a nice jolt to the upside as earnings recapture investor attention.

    Expect Earnings to Power Through the Fog

    The consensus estimate for first quarter (Q1) earnings growth is 12.3%. As we know, barring a swift and sharp economic shock intra-quarter, companies do a tremendous job of beating estimates. In fact, S&P 500 earnings have historically beaten consensus estimates more than 90% of the time. We expect Q1 to be no different.

    With a boost from higher energy sector profits and a year-over-year decline in the U.S. dollar, balanced against some additional costs and supply chain disruptions across certain industries, we expect earnings growth in the mid-teens for the quarter. That would mark the sixth straight quarter of double-digit earnings growth.

    Massive artificial intelligence (A) investment and fiscal stimulus from the One Big Beautiful Bill Act (OBBBA) provide a solid foundation for revenue growth. Strong exports out of South Korea and the latest bump up in manufacturing surveys add to our confidence that Q1 earnings will be solid.

    That said, guidance may not be “clean” given not just higher oil prices but disruptions to commodity supply chains and transportation, and higher interest rates. This is why we’re not counting on estimates for the rest of the year to rise through reporting season (starting the week of April 13), with the exception of the energy sector and potentially technology depending on what happens with capital investment plans for the so-called hyperscalers building out AI data centers.

    Double-Digit Earnings Growth Streak Poised to Continue

    Bar chart of actual S&P 500 earnings growth from Q1 2023 to Q4 2025, along with estimates for Q1 2006 to Q4 2026, highlighting double-digit earnings growth should continue in Q1 2026 and beyond.

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

    AI Investment Isn’t Going Anywhere

    Speaking of the hyperscalers, which will again be a huge earnings driver this quarter, expectations for capital investment in 2026 have risen to over $650 billion. In December 2025, when LPL Research published Outlook 2026: The Policy Engine, that forecast stood at $520 billion.

    Based on current estimates, about 80% of the earnings growth for the S&P 500 in Q1 is expected to be driven by the technology sector, while the Magnificent (Mag) Seven alone is estimated to generate nearly half of S&P 500 earnings growth and grow earnings by about 19% based on current consensus estimates on an earnings-weighted basis.

    That pace of growth from this group, which could likely exceed 25% when all the results are in, will probably more than double the earnings growth rate that the “S&P 493” will deliver. However, that gap is expected to narrow in coming quarters, something to watch closely given the recent struggles of these mega-cap technology stocks. The Mag Seven’s valuation, at a price-to-earnings ratio near 26, has come down but remains roughly 25% higher than the valuation for the rest of the S&P 500, aka the “493.”

    This earnings growth gap supports LPL Research’s continued preference for large growth equities over their large value counterparts for now, but the leash has gotten shorter. The Mag Seven has slipped 13% year to date based on the Bloomberg Magnificent Seven Index, well behind the 5% drop in the S&P 500 over that time period.

    Magnificent Seven Remains a Powerful Earnings Driver

    Bar chart of Magificent Seven earnings growth compared to earnings growth excluding the Magificent Seven from Q1 2024 to Q4 2025, along with estimates for Q1 2006 to Q4 2026, highlighting the Magificent Seven remains a powerful earnings driver.

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

    Corporate America Has Managed Margin Pressures Remarkably Well

    Corporate America has managed costs very well recently, enabling S&P 500 companies to expand operating margins for five straight quarters despite the incremental cost of tariffs. Recall, after the Supreme Court ruled tariffs enacted under the International Emergency Economic Powers Act were illegal, the Trump administration put them back on using a different legal authority. In addition, refunds will take quite some time, so they will not affect first quarter results. Bottom line, don’t look for margins to get a tariff boost, although the refund pool that is estimated at over $160 billion may drop into some importers’ coffers at some point down the road.

    Just when companies figured out how to absorb tariffs and still expand margins, they are getting hit with more challenges in the form of higher oil prices, rising interest rates, and disrupted shipments of various materials and other goods through the Strait of Hormuz because of the Iran conflict. Although costs have risen for many companies that consume a lot of oil, particularly transportation-related companies like airlines, truckers, and cruise lines, corporate America overall is less energy-intensive than in the past. Companies are also gaining productivity from AI adoption and limited hiring. And the energy sector, though less than 5% of S&P 500 profits, is expanding margins due to high oil and gas prices, helping to offset some of the margin pressures other industries are experiencing.

    In other words, the impact on margins from the Mideast conflict in the first quarter will likely be manageable, as is reflected in analysts’ estimates.

    Profit Margin Expectations Are Likely Overly Optimistic Given Tariffs and Mideast Disruptions

    Bar chart of S&P 500 operating margins from Q1 2024 to Q4 2025, along with estimates for Q1 2006 to Q4 2026, highlighting profit margin expectations are likely overly optimistic given tariffs and Mideast disruption.

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

    Earnings Outlook for 2026 Still Bright

    As always, we want to pay more attention to management guidance for future quarters than to the backward-looking results from the prior quarter. In general, we expect management commentary to express greater uncertainty this quarter due to events in the Mideast and related uncertainty in the energy and rates markets. Companies with business models sensitive to oil and rates will likely strike a cautious tone in their outlooks even after reporting solid first quarter results. Nonetheless, bolstered by our energy independence, look for corporate America to impress in the first quarter.

    The second quarter may be more difficult. Results carry more uncertainty as disruptions to shipping traffic through the Strait of Hormuz could continue well into the current quarter (though our base case calls for a resolution in April). Assuming a resolution is reached sometime within the next few weeks, the economic impact would be limited. That leaves solid 2.5%-plus GDP growth, the OBBBA stimulus, and massive AI investments as big earnings drivers. Rising consensus estimates for this year and next also point to a robust earnings outlook.

    Bottom line, our high-single-digit S&P 500 earnings growth forecast for 2026, at $290 per share, is likely too low. We will strongly consider raising that forecast after earnings season is over and once there is greater clarity surrounding the resolution of the Mideast conflict. Our 10% S&P 500 earnings growth forecast for 2027, to $320 per share, looks reasonable given our macro forecasts.

    S&P 500 Earnings Estimates Keep Going Higher Despite AI, Mideast Concerns

    Line graph comparing 2026 consensus earnings per share estimates to 2027 amounts, highlighting &P 500 earnings estimates keep going higher despite AI, Mideast concerns.

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

    Technical Analysis Perspective

    The broader market has moved into a more fragile state, with the S&P 500 now trading below both its widely followed 200‑day moving average (dma) and its November lows. Momentum has turned bearish, reflected in a consistent pattern of lower highs and lower lows over the past two months. Although oversold conditions are starting to emerge, most indicators have yet to reach the extreme levels that typically signal contrarian buying opportunities. For instance, only about 10% of S&P 500 stocks registered oversold Relative Strength Index readings on Friday, well below the +50% seen last April or the +20% levels observed during previous market corrections in recent years.

    Investor positioning reinforces this cautious backdrop. Data from VandaXAsset shows that combined U.S. equity positioning has turned negative but remains far from levels historically associated with major turning points. Retail investors have meaningfully de‑risked from elevated exposure earlier in the year, though last week offered early hints of renewed buy‑the‑dip behavior. Rising volatility and weakening price trends have prompted further de‑risking among institutional investors, who are not only net short the broader market but also materially short interest rates.

    Selling pressure has been widespread, and market internals continue to deteriorate. Only 43% of S&P 500 constituents remain above support from their November lows, with a similar share still holding above their 200‑dma. Breadth composition is also concerning, as defensive sectors have taken leadership. Technology, the market’s largest weight, has rolled over, while financials and consumer discretionary sit among the weakest areas in our technical work. A durable recovery will require renewed risk appetite across these sectors, along with meaningful technical improvements.

    An Uncomfortable Spot for Stocks

    Two panel chart comparing S&P 500 and its 200-day moving average from January 2021 to March 2026 in panel one, and the percentage of S&P 500 stocks above their 200-day moving average from January 2021 to March 2026 in panel two.

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

    Bottom line: The longer‑term bull market trend remains intact, but technical signals increasingly point to further downside risk for equities. While the recent deterioration in the S&P 500 has been meaningful, it has not yet reached the type of extremes that typically justify a contrarian stance. The index’s current discount has also failed to attract meaningful demand, as investors across the board continue to de‑risk. We continue to believe a buying opportunity will develop, but at this stage the risk‑reward profile does not warrant action. Below are six key technical indicators we are monitoring for signs of a potential inflection:

    1. Oil is in the driver’s seat of risk appetite. Price stability in oil markets is key for a durable rebound in stocks. Brent crude falling below support at $98 would be a step in the right direction, especially if accompanied by a compression in longer-dated Brent futures contracts, which are still pricing in a higher-for-longer regime. In addition, implied volatility in oil will need to materially come down from historically high levels.
    2. More widespread oversold conditions. Oversold conditions across equity markets are emerging, but most indicators have not yet entered washed-out territory.
    3. Sentiment and positioning at capitulation levels. Bearish sentiment and investor positioning have not fallen to levels consistent with previous turning points. Stocks beginning to rise on relatively negative news would indicate that downside risks have been largely priced in.
    4. Improvement in market breadth. With fewer than half of S&P 500 constituents currently in uptrends, a move back above the 50% threshold in our trend model would signal improving internal strength.
    5. Rotation back toward cyclical leadership. A clear shift away from defensive leadership and back toward cyclical sectors would indicate renewed risk appetite.
    6. Stability in interest rates. 10‑year Treasury yields holding below the 4.50–4.60% resistance range and a decline in 2‑year yields below the Federal Reserve’s 3.75% target rate would provide a more supportive backdrop for stocks.

    Conclusion

    Despite the near‑term uncertainty created by the Mideast conflict and its impact on oil, interest rates, and supply chains, the fundamental earnings backdrop remains constructive. Corporate America continues to demonstrate impressive resilience, supported by strong demand trends, massive AI‑driven investment, and fiscal stimulus, all of which position S&P 500 earnings for another year of solid growth. While management guidance may reflect understandable caution this quarter, the underlying drivers of profitability remain intact.

    At the same time, technical conditions argue for patience. Market internals have weakened, investor positioning is defensive, and oversold signals have yet to reach levels that typically mark durable turning points. Together, these dynamics suggest that while the longer‑term outlook is favorable, the near‑term path may remain bumpy. As clarity around geopolitical developments improves and volatility subsides, the foundation appears set for earnings to reassert themselves as the primary driver of market direction.

    Asset Allocation Insights

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

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

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

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

    Adam Turnquist, Chief Technical Strategist, LPL Financial

    Jeffrey Buchbinder, Chief Equity Strategist, LPL Financial

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  • Weekly Market Performance | March 27, 2026

    LPL Research
    Last Updated: 

    LPL Research provides its Weekly Market Performance for the week of March 23, 2026. U.S. and global equity markets finished the week mostly lower as geopolitical uncertainty in the Middle East continued to drive volatility across regions and asset classes. Equities were whipsawed by shifting hopes for de‑escalation, choppy energy prices, and renewed pressure on large‑cap technology stocks, while Treasury yields moved higher amid weak auction demand and elevated inflation expectations. International markets were mixed, with Europe showing relative resilience and most Asian markets declining, as investors remained highly sensitive to developments affecting global energy supplies. In commodities, crude oil was little changed, and in currencies, the dollar strengthened and the yen weakened near key levels.

    Stock Index Performance

    Index Week-Ending One Month Year to Date
    S&P 500 -2.06% -7.36% -6.91%
    Dow Jones Industrial -0.79% -7.68% -5.92%
    Nasdaq Composite -3.09% -7.45% -9.73%
    Russell 2000 0.58% -6.83% -1.18%
    MSCI EAFE 0.09% -11.11% -2.46%
    MSCI EM -1.02% -11.99% 0.67%

    S&P 500 Index Sectors

    Sector Week-Ending One Month Year to Date
    Materials 4.26% -9.02% 7.02%
    Utilities 3.03% -3.88% 7.00%
    Industrials -1.01% -9.78% 2.89%
    Consumer Staples 1.33% -8.19% 6.48%
    Real Estate -0.70% -8.28% 0.10%
    Health Care -0.73% -10.07% -7.16%
    Financials -1.89% -6.56% -12.48%
    Consumer Discretionary -1.76% -8.65% -12.14%
    Information Technology -3.37% -6.29% -11.54%
    Communication Services -6.98% -11.41% -11.18%
    Energy 6.26% 12.57% 40.04%

    Fixed Income and Commodities

    Indexes and Commodities Week-Ending One Month Year to Date
    Bloomberg U.S. Aggregate -0.08% -2.46% -0.76%
    Bloomberg Credit 0.00% -2.63% -1.20%
    Bloomberg Munis -0.64% -2.55% -0.41%
    Bloomberg High Yield 0.01% -1.49% -0.81%
    Oil 1.18% 48.43% 73.25%
    Natural Gas 0.00% 8.25% -16.03%
    Gold 0.62% -14.37% 4.65%
    Silver 3.52% -25.00% -1.85%

    Source: LPL Research, Bloomberg 3/27/26 @3:19 p.m. ET
    Disclosures: Indexes are unmanaged and cannot be invested in directly.

    U.S. and International Equities

    U.S. Equities: Headlines remained volatile and noisy over the last full week of March, leaving the S&P 500 below the weekly flatline as equity markets continued to broadly be driven by geopolitical headlines and their directional impact on oil prices. Losses were relatively measured, however, as major U.S. averages traded in positive territory for the majority of the week on de-escalation hopes. Risk appetite was lifted after President Trump stated that Washington and Tehran had “very productive” talks on ending hostilities in the Middle East, and halted attacks on energy infrastructure before delivering a 15-point peace proposal to Iran. Equities held gains on the signals that Washington may be serious about winding down the conflict via the credible off-ramp, but Iran’s denial of peace talks, rejection of the ceasefire proposal, and bounce in crude prices kept a lid on stocks.

    Despite the White House extending its pause of attacks, de-escalation doubts continued to weigh on already fragile sentiment, with a slide in big tech names exacerbating losses at the index level. Shares of social technology giant Meta (META) sold off after being ruled liable for addictive social media products, alongside Alphabet (GOOG/L), which separately sparked declines in memory and chipmakers after unveiling a new algorithm that may reduce memory needs for artificial intelligence. A continued backup in Treasury yields and Brent crude prices rising near $110 per barrel were also flagged as headwinds for stocks due to the subsequent inflation and economic jitters, which led to continued selling Friday as U.S. and Israeli defense forces struck Iranian nuclear sites and steel facilities.

    International Equities: Across the pond, the European STOXX 600 held gains despite selling pressure over the latter half of the week. The regional benchmark jumped late in Monday trading in response to reported U.S.-Iran peace talks, and persevered through climbing energy prices the rest of the week to stay above the weekly unchanged point. Mid-week gains were a bright spot as bulls waded into the market on assurance from European Central Bank President Christine Lagarde that a rate hike is not penciled in at this time, but central bankers will respond swiftly if inflationary pressures rise. Nonetheless, stocks eased into the weekend on chatter around increasing headwinds the longer energy prices remain elevated, as well as the Bank of France lifting inflation expectations and cutting its growth forecast due to the conflict.

    Asian stocks ended mostly lower, with just Japan and Australia bucking the trend among major markets. Like the U.S. and Europe, the Asia-Pacific region remained highly sensitive to developments out of the Persian Gulf, with fluctuating hopes of a restored flow of oil out of the Strait of Hormuz driving choppy trading. South Korea faced the most downside pressure on chip and memory share weakness following the GOOG/L news, while losses for greater China were capped by state media reports of a jump in homegrown artificial intelligence model adoption earlier in the week.

    Fixed Income, Currency, and Commodity Markets

    Fixed Income: Core bonds, measured by the Bloomberg Aggregate Index, traded slightly lower this week. Despite the rise in Treasury yields over the past month, this week’s auctions were, by many measures, disappointing. The Treasury Department auctioned off $183 billion (total) in two-year, five-year, and seven-year notes this week, and demand for each auction came in among the lowest levels of the year with demand for the two-year auction the lowest in two years. Moreover, in each auction the Treasury was forced to pay more than market expectations to generate even this muted level of demand. The weak auction results largely reflect heightened uncertainty surrounding the ongoing Iran conflict and a near‑term increase in inflation expectations. Short‑term inflation expectations continue to rise, and market-implied expectations for Fed rate cuts have shifted to probabilities of rate hikes extending into June 2027. Importantly, longer-term inflation expectations remain well anchored, which suggests the Fed is in no need to actually increase rates right now.

    Despite this week’s weak Treasury auction results, we do not believe we are on the precipice of an outright buyers’ strike. With yields approaching key psychological levels — around 5% on the 30‑year and 4% on the two‑year — we expect incremental demand to emerge, given current market pricing for Fed policy, even if those thresholds are temporarily breached. In other words, absent a meaningful un-anchoring of long‑term inflation expectations, we see limits to how much further yields can rise.

    Commodities and Currencies: The broader commodities complex traded slightly lower this week after bouncing off mid-week lows. Crude oil prices didn’t budge from the commodities spotlight again, but price momentum did cool as both West Texas Intermediate (WTI) and Brent crude prices posted moderate week-to-date moves. While rising in recent sessions on de-escalation doubts from investors, crude struggled to fully recover from Monday’s steep drop triggered by reported U.S.-Iran ceasefire talks. Nonetheless, the Strait of Hormuz remained bottlenecked (Iran did allow 10 tankers to traverse the waterway as a show of goodwill) as the conflict dragged on, leaving prices elevated its length remains unclear and U.S. insurance programs have yet to begin. Gold prices also remained choppy as ceasefire hopes whipsawed, but the yellow metal ultimately traded modestly higher Friday afternoon. Silver traded higher thanks to a positive Friday session, while the U.S. Dollar Index strengthened against its peers after shrugging off early weakness. The Japanese yen also made headlines as potential currency intervention by Tokyo remains on the table while lingering near key levels versus the U.S. dollar.

    Economic Weekly Roundup

    The economic calendar was relatively quiet over the last five days with high-profile prints slated for next week at the start of the new month. The headline of this week’s reports was arguably Friday’s release of the latest consumer sentiment report from the University of Michigan. While the gauge was revised lower than consensus expected for the month of March, the drop was not extreme and did not come as a major shock to investors as dented consumer sentiment was generally to be expected given ongoing inflation angst driven by higher oil prices. Also released this week was initial jobless claims arriving in line with expectations while continuing claims declined, and a slight miss in preliminary composite economic activity data on the back of weaker services results. However, both the manufacturing and services Purchasing Managers’ Indexes remained in expansion.

    The Week Ahead

    The following economic data is slated for the week ahead:

    • Monday: Dallas Fed Manufacturing Activity (Mar)
    • Tuesday: FHFA House Price Index (Jan), S&P Case-Shiller 20-City and National Home Price Indexes (Jan), MNI Chicago PMI (Mar), Conference Board Consumer Confidence report (Mar), JOLTS Jobs report (Feb), Dallas Fed Services Activity (Mar)
    • Wednesday: MBA Mortgage Applications (Mar 27), ADP Employment Change (Mar), Retail Sales (Feb), S&P Global U.S. Manufacturing PMI (Mar final), ISM Manufacturing (Mar), Business Inventories (Jan), Wards Total Vehicle Sales (Mar)
    • Thursday: Challenger Job Cuts (Mar), Trade Balance (Feb), Initial Jobless Claims (Mar 28), Continuing Claims (Mar 21)
    • Friday: Change in Nonfarm, Private, and Manufacturing Payrolls (Mar), Average Hourly Earnings (Mar), Average Weekly Hours All Employees (Mar), Unemployment Rate (Mar), S&P Global U.S. Services and Composite PMIs (Mar final)

    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: #1084551

  • Energy Stocks Vary Across Market Cycles

    Energy Stocks Don’t Act the Same in Every Cycle

    Thomas Shipp | Head of Equity Research
    Last Updated: March 26, 2026

    Perspectives on The Energy Sector and Underlying Sub-Sectors

    Energy cycles have a way of rewarding investors who show up early, while punishing those who assume the next upturn will look exactly like the last one. Supply disruptions caused by the war in Iran that began just under a month ago have upended markets globally, with oil markets taking center stage. My colleagues Kristian Kerr and Adam Turnquist have each written pieces this month digging into the physical oil market, “Assessing the Impact of Developments in Iran: Watch Energy” and “Oil in the Driver’s Seat as Geopolitical Tensions Rise”, respectively. Our focus is on the equities that are in the oil and gas business (energy stocks), focusing on the individual sub-sectors within the broader energy sector. Energy was the best-performing sector in the S&P 500 before the war broke out, and investor interest has increased as they attempt to underwrite the new geopolitical environment.

    Energy investing is rarely hard because the math is complicated, but because cycles mess with judgment. When oil is cheap and the sector is hated, it feels irresponsible to touch it. When oil is expensive and headlines are everywhere, it suddenly feels like the simplest trade in the world. That’s typically when investors take the most risk for the least incremental reward.

    As with most investing topics, we think the right way to approach energy equity analysis is as a mosaic, with the mind and machine working together to weigh the evidence. You don’t need one perfect indicator, but a set of clues that improve your odds of avoiding two classic mistakes in energy: showing up too late and leaning into the wrong subsector for the environment. What follows is a brief review of energy subsector performance and a framework for thinking about which sub-sectors tend to lead at the onset of an energy investment cycle, including a zoom in on energy sub-sector performance from December’s WTI crude oil closing low to date, with a focus on the before and after of the onset of the Iran War. Finally, we provide a brief overview of each of the main energy sub-sectors.

    Energy Stocks Don’t Act the Same in Every Cycle

    Many assume investing in energy stocks (oil and gas stocks, specifically) is simply one trade based on oil and gas prices. In reality, the energy complex is a collection of very different businesses that respond to different triggers. Some are in fact closely tied to commodity prices, while others are more closely tied to activity levels like exploratory drilling or producing refined energy products like diesel fuel and gasoline. Still others behave more like long duration cash flow machines where contract structure and capital allocation matter more than the spot price of oil.

    That distinction matters because the market does not reward oil exposure the same in every cycle. Oil prices are typically the catalyst, but spending and activity are typically the factors that drive value-creation (and destruction) throughout the cycle, and therefore are key to uncovering equity leadership.

    To provide a baseline on where we are today, in terms of leadership, we highlight the broad-based energy sector and individual sub-sector stock index performance on a near-term basis in the “Refiners Have Outperformed Over the Last Year, While Midstream (Pipelines) and E&Ps Lagged” chart and on a longer-term lookback in the “Long Term Energy Sector and Sub-Sector Price-based Index Returns” chart.

    Refiners Have Outperformed Over the Last Year, While Midstream (Pipelines) and E&Ps Lagged

    Line graph comparing the energy sector to subsectors from March 2025 to March 2026, highlighting refiners have outperformed over the last year.

    Source: LPL Research, Bloomberg 03/24/26
    Disclosures: S&P 1500 Energy Sector / Sub-Sector Indexes: Cumulative Price Returns (Monthly, December 2001– March 24, 2026), Indexed at 100 as of (Daily, Trailing One Year), Indexed at 100 as of 3/24/2025. All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not materialize as predicted and are subject to change.

    Long Term Energy Sector and Sub-Sector Price-based Index Returns

    Line graph comparing the energy sector to subsectors performance from December 2001 to December 2025.

    Source: LPL Research, Bloomberg 03/24/26
    Disclosures: S&P 1500 Energy Sector / Sub-Sector Indexes: Cumulative Price Returns (Monthly, December 2001– March 24, 2026), Indexed at 100 as of 04/29/2005 (Earliest point with data for all indexes). All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not materialize as predicted and are subject to change.

    A Practical Road Map of What Tends to Lead Based on Cycle

    The oilfield services (OFS) sector is often considered the “tip of the spear” in terms of an inflection in oil and gas activity. The sector generally leads out of the gates in an upcycle, followed by (or concurrently with) the E&Ps. While there is certainly truth in that, we prefer a more conditional way of describing leadership, depending on what the market believes about the duration of the move in oil prices. A helpful way to structure this thought process is based on how the sector reacts to three different views on the duration of the oil move, and how we characterize the returns generated by those views.

    1. If oil rises but investors don’t trust it, the market often prefers short-cycle commodity exposure like certain exploration and production companies (E&Ps) and treats the move as a trade. These businesses move most with oil and gas prices and the forward curve. We characterize the returns here simply as “oil beta”.
    2. If oil rises and the market starts believing it, leadership often shifts toward activity and pricing power. This is where OFS stocks will typically lead and outperform. These businesses benefit when industry spending rises and the service supply chain tightens. The equity upside historically has come not just when revenue climbs, but when utilization tightens and pricing power shows up via higher margins.
    3. If the cycle persists and broadens into international/offshore, the market starts to focus on visibility and leadership can shift again toward backlog, project awards, and execution. In other words, the parts of the ecosystem that benefit from long lead-time investment. Large service platforms, offshore/subsea participants with backlog, many integrated majors, and midstream “toll-road” models often show up here.

    Since the recent pre-war lows in oil prices on December 16, 2025, energy equities have largely moved with oil. The notable standout was OFS, which tends to move with oil as a cycle develops, but moved well ahead of the commodity leading up to the war, though has underperformed since the war broke out due to disruptions in ongoing activity in the Middle East. The outperformance of the commodity relative to the stocks since the war broke out is not surprising given the physical nature of the supply disruption (highlighted in the “WTI Crude Oil Prices Have Outpaced Energy Equities Since War Broke Out” chart). However, we also believe this may point to the market not trusting the commodity move (scenario #1), and thus there is room for catch-up potential should oil prices sustain higher levels. In other words, we don’t think it’s too early to consider certain energy sub-sectors.

    WTI Crude Oil Prices Have Outpaced Energy Equities Since War Broke Out

    Line graph comparing WTI crude oil prices to energy and subsectors performance from December 2025 to March 2026.

    Source: LPL Research, Bloomberg 03/24/26
    Disclosures: WTI Crude Oil (Generic Rolling Front Month Futures Contract) and S&P 1500 Energy Sub-Sector Indexes: Cumulative Price Returns (Daily, 12/16/2025–03/24/2026), Indexed at 100 as of 12/16/2025 (Recent low in WTI Crude Oil). All indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not materialize as predicted and are subject to change.

    Energy Sub-Sector Cheat Sheet

    In this brief closing section, we provide high-level definitions of the sub-sectors that make up the broader energy sector, important performance indicators to watch in each sub-industry, and what typically drives returns in the stocks. Think of this as a sort of CliffsNotes (do those still exist?) for the energy sector to help map the terrain and chart the course for a deeper-dive analysis.

    Energy Equipment and Services (Oilfield Services, or OFS)

    What they do: Provide the tools, equipment, technology, and labor that help producers drill wells, complete wells, and maintain or enhance production. This category ranges from drilling services to production chemicals to subsea systems.

    What to watch:

    • Customer, i.e., oil and gas companies’ capital expenditures (capex) plans and commitments (FIDs, or “Final Investment Decisions” for large, long-cycle mega projects)
    • Rig and completion activity
    • Service pricing commentary
    • Increases (or decreases) in sequential operating margins (signs of pricing power, or lack thereof)
    • Offshore rig day rates, contract awards, backlog and order intake for longer-cycle businesses (contract drillers, subsea equipment and surface capital equipment, project services)

    What drives returns: Industry spending (capex), asset (rigs, equipment, etc.) and crew (labor) utilization, and pricing power. OFS companies have historically driven strong operating leverage when demand tightens.

    Exploration and Production (Upstream Oil and Gas, or E&Ps)

    What they do: Simplistically, find and produce oil and gas. Their revenue is tied directly to commodity prices and production volumes, while cost structures are largely driven by service costs (revenue for OFS companies), labor, and land acquisition/leases and royalties to land owners/partners.

    What to watch:

    • Reinvestment rate, i.e., how much cash flow goes back into drilling
    • Balance sheet leverage (debt)
    • Breakevens (cash or accounting-based operating costs, capex, and sometimes dividends). Typically stated in dollars per barrel of oil or per million British Thermal Units of natural gas (MMBtu).
    • Decline rates, or the percentage annual reduction in production from an oil or gas field from its peak
    • Payout framework (dividends/buybacks) and whether it holds through commodity volatility

    What drives returns: Commodity prices, the hedge book (how much production revenue is “locked in” at a pre-determined price), reinvestment discipline, and capital returns.

    Storage and Transportation (Midstream Oil and Gas)

    What they do: Move, process, and store oil and gas. Many midstream businesses resemble toll roads in that they are paid for volumes moved and contracted services, often with less direct commodity exposure.

    What to watch:

    • Contract structure and duration
    • Customer concentration (who pays them)
    • Leverage and refinancing risk
    • Volume outlook by basin and product (oil vs gas vs natural gas liquids (NGLs))

    What drives returns: Contract quality, volume stability, counterparty health, and balance sheet management.

    Marketing and Refining (Downstream Oil and Gas)

    What they do: Turn crude oil into products like gasoline, diesel, and jet fuel. Refiners are not a pure bet on oil prices, but typically a bet on product margins (i.e., crack spreads, or the difference between crude input costs and product selling prices).

    What to watch:

    • Product inventory levels (gasoline/diesel)
    • Unplanned outages and maintenance cycles
    • Demand seasonality
    • Regulatory changes that affect blending or capacity

    What drives returns: Crack spreads, inventories, outages, regulations, and global refining capacity utilization.

    Integrated Oil and Gas Companies (IOCs)

    What they do: Operate across the value chain, including upstream production, midstream logistics, and downstream refining/marketing (and sometimes chemicals). The integrated model can smooth earnings across cycles.

    What to watch:

    • Project pipeline and cost discipline
    • Dividend and stock buyback sustainability through the cycle
    • Downstream margin sensitivity (refining can help or hurt depending on conditions)
    • Geopolitical exposure and fiscal terms in key regions (jurisdiction matters in a global industry)

    What drives returns: Upstream prices, downstream margins, project execution, and capital allocation.

    Additional disclosure: The S&P Composite 1500® Energy comprises those companies included in the S&P Composite 1500 that are classified as members of the GICS® Energy sector.

    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: #1084398