Jeff Buchbinder | Chief Equity Strategist

Last Updated: February 20, 2026

On February 20, the U.S. Supreme Court ruled that the Trump administration’s tariffs issued under the International Emergency Economic Powers Act (IEEPA) are illegal. The ruling invalidates a big component of President Trump’s sweeping tariff program, including reciprocal tariffs and drug‑related tariffs on Canada, China, and Mexico. These measures were imposed under national emergency declarations.

While the Court did not explicitly order refunds to be paid — instead sending that decision to the lower courts — by some estimates this decision opens the door to potentially as much as $175 billion in tariff reimbursements to U.S. importers.

Here are some of our key takeaways.

1. Short-term stimulus jolt. Though mostly expected, the U.S. economy, key U.S. trading partners, and corporate America just found out they are getting a short-term stimulus boost. IEEPA had been used for an estimated roughly half of the tariffs imposed by the Trump administration. While the precise amounts are unclear, countries and companies will now play less. An overall U.S. tariff rate that had been expected in the low teens just a few months ago is now unlikely to reach double-digits, even after new replacement tariffs are imposed under different legal authority.
2. Intermediate-term effects are likely to be minimal. President Trump already revealed his tariff pivot, from IEEPA to Section 122 (which allows for 15% tariffs for 150 days) and Section 301 (which takes several months to investigate). LPL Research believes most of the IEEPA tariffs can be replaced by summertime (Evercore ISI’s policy research team believes 90% of tariffs could potentially be restored).
3. Trade policy uncertainty remains. While companies paying smaller tariffs is positive for profit margins and the Supreme Court ruling offers more clarity on the future path of tariffs, a lot of uncertainty remains. Markets will continue to debate whether lower courts will force the Treasury to issue refunds. In addition, it’s not clear what this decision means for trade negotiations and completed trade frameworks with other countries (notably, given the USMCA, this news doesn’t mean as much for imports from Canada and Mexico).
4. Inflation impact is murky. If tariffs have not affected inflation much on the way in, then it follows that they won’t affect prices much coming out. So, while benefits to inflation will likely be minimal, taking a point or two away from expectations for where tariff rates will eventually land can reasonably be expected to lower inflation by a few basis points.
5. Don’t expect Fed rate cut expectations to move much. The removal of tariffs reduces a source of friction in the real economy. Tariffs were expected to raise input costs, tighten profit margins, and weigh a bit on economic growth — slowing economic conditions are generally supportive for Treasuries. With that drag removed, growth may stabilize at the margin, and inflationary pressures embedded in the bond market could ease faster than markets previously expected. This changes the balance of risks around the Fed’s rate path and may lead to some modest repricing of rate cut expectations and incremental U.S. dollar weakness.
6. We would fade the stock market bounce in tariff losers. Given tariffs are already in the process of coming back in with President Trump’s announcement of a new 10% global tariff (that didn’t take long), we wouldn’t chase any rebounds in import-heavy consumer retailers. Given mixed post-decision reactions in retailers in Friday’s trading, it appears the market is onboard with this assessment. Among tariff losers, our preference would be to play homebuilders, industrials, and technology hardware/semiconductors over apparel retailers and automakers.
7. Treasury may face additional short-term funding pressure. For the Treasury market, this trade policy shift removes a meaningful — though not dominant — support to federal revenues and reopens questions about funding pressures at a time when deficits were already poised to remain in excess of $1.8 trillion annually. With less tariff income, the Treasury may need to increase issuance modestly, particularly in bills and shorter‑dated notes, to offset the lost cash flow. This could put upward pressure on yields at the margin, especially in an environment where supply and demand dynamics were already being tested. The initial selloff in the Treasury market on the news was minimal, pushing 2-year and 10-year yields up by just 2-3 basis points (U.S. 10-year Treasury yield is 4.09% as of 3pm ET on February 20).
8. Refunds may introduce more near-term financing needs. Another key implication stems from the prospect of tariff refunds. Because the Court found the tariffs unlawful, many importers may now file refund claims, potentially up to $175 billion. Even if processed gradually, this creates a new near‑term financing need for the federal government. Any meaningful issuance to bridge refund‑related outflows would likely concentrate in the front end of the curve, steepening it modestly.

That’s where we see things now, but this situation is fluid. We will continue to bring updates as more information becomes available.

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: #1068512

LPL Research
Last Updated: March 20, 2026

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

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

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

U.S. and International Equities

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

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

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

Fixed Income, Currency, and Commodity Markets

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

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

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

Economic Weekly Roundup

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

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

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

The Week Ahead

The following economic data is slated for the week ahead:

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

Important Disclosures

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

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

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

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

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

Asset Class Disclosures –

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

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

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

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

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

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

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

Precious metal investing involves greater fluctuation and potential for losses.

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

This research material has been prepared by LPL Financial LLC.

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

For Public Use – Tracking: #1081285

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

Raise your hand if you’ve encountered this headline recently: “Market Drops Sharply on Fears of Wider Mideast War”. What about this one: “Stocks Fall as Oil Prices Hit New Highs”? Or this: “Wall Street Sees Volatile Session Amid Uncertainty”? Odds are good that your hand went up (or at least it would have if you were playing along). Of course, we’ve all been exposed to the concerning headlines lately, felt uncertain, and maybe even had a knee jerk reaction to sell assets and hoard cash. But what if we told you those headlines are over 35 years old? Yup, those are New York Times banners from August 1990. They were written after the Iraqi invasion of Kuwait, when equity volatility spiked, oil prices went parabolic, and doomsday was supposedly imminent. Sounds familiar, right?

As we navigate the headlines surrounding the conflict in Iran, it’s important to remember that markets have faced geopolitical shocks many times before — and each time, volatility has ultimately given way to stability as conditions clarify and the situation is resolved. Yes, time can be an investor’s best friend. We’ll come out of this crisis, just as we always have in the past. In the meantime, as a prudent investor, you can also play an active role in your portfolio construction. With that in mind, we’ll highlight some key themes we believe can help you navigate market turbulence that we at LPL Research are currently employing in our strategically aligned model portfolios.

Alternative Investments

We like diversifying liquid alternatives and uncorrelated return streams. Global macro funds use macroeconomic signals (consider geopolitical developments such as kinetic conflicts as part of this), to invest across a broad range of asset classes, including but not limited to equities, fixed income, currencies, and commodities. These funds take a broad top-down approach and can be managed either on a discretionary basis, meaning they have more flexibility in positioning, or systematically, meaning they follow rules-based trading and position sizing techniques. Managed futures strategies, aka trend followers, can invest both long and short (i.e., they can take positions that can benefit from gains or declines) across a wide range of asset classes and work well in environments where price trends are more persistent, thus allowing managers to better capitalize on themes and sentiment. Multi-strategy, as the name implies, can combine multiple hedge funds or alternative investment styles into a single vehicle with the goal of enhancing risk-adjusted returns through diversification. We believe a thoughtful mix of these strategies can be impactful in limiting long-term capital deterioration, particularly amid periods of market uncertainty.

Treasury Inflation-Protected Securities (TIPS)

If you hold the view that the market is underpricing inflation risks, which we do on a long-term basis, then TIPS can help hedge that risk. We prefer TIPS with shorter duration (less interest rate sensitivity) to manage rate exposure. It’s important to note that TIPS really provide value when there are inflation surprises to the upside. Standard Treasury (nominal) yields already have an expected inflation component baked in as investors demand some sort of maintenance of purchasing power. TIPS, however, can capture what the market hasn’t priced in by adjusting the principal, and thus coupon payments, upwards when inflation exceeds what’s already expected. The longevity of the current conflict in Iran will go a long way in determining how meaningful the impact on inflation will be. Also, as we’ve seen recently, certain pockets of the global market experience varying degrees of sensitivity to input costs and thus inflation expectations (e.g., Japanese equities have traded meaningfully lower than U.S. tech since the start of the conflict). Nonetheless, the potential for inflationary shocks is omnipresent, and allocations to TIPS serve well to quell such shocks.

Real Assets

In a similar vein as alternatives and TIPS, we believe commodities and global listed infrastructure assets can help provide diversifying properties and inflation absorption to portfolios. However, they offer more nuanced exposure to real assets, often physical in nature, that hold intrinsic worth. These assets, as scarce storers of value in many cases, can play a particularly important role as both return enhancers and diversifiers. In the case of commodities, think of the energy and agriculture complexes, each trading meaningfully higher as supply fears and international trade disruptions have taken hold this month. In infrastructure, consider contractual lease agreements, and regulated pricing of real estate and utilities businesses. Combined, these asset classes can coalesce as a formidable portfolio ballast, staving off inflation, providing current income and return differentiation.

Conclusion

When enduring uncertain moments like these, it’s important to stay anchored in long-term fundamentals, disciplined asset allocation, and evidence-based decision-making. While the situation is evolving, the underlying drivers of portfolio resilience remain unchanged, and history reminds us that well-constructed investment strategies are built to withstand periods of geopolitical stress.

As always, LPL Research is ready and available to help guide you through asset allocation, portfolio construction, and investment vehicle implementation decisions. For additional information on our long-term, strategic asset allocation, please visit our recently updated 2026 Strategic Asset Allocation.

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: #1081029

LPL Research
Last Updated: March 18, 2026

Do Midterm Elections Matter for Markets? A Historical Perspective

The Return of the Stock Picker’s Market

Adam Turnquist | Chief Technical Strategist

Last Updated: February 17, 2026

Hyperscalers Plan to Live Up to Their Name

Jeff Buchbinder | Chief Equity Strategist

Last Updated: February 12, 2026

Imagining a Modern Fed-Treasury Accord

Lawrence Gillum | Chief Fixed Income Strategist

Last Updated: February 11, 2026

In the February 2 Weekly Market Commentary, we noted the Federal Reserve’s (Fed) potentially constrained policy conditions as resilient growth and above‑trend inflation are intersecting with an increasingly unsustainable fiscal trajectory. That implicit linkage may now be shifting toward something more explicit if Kevin Warsh and Treasury Secretary Scott Bessent get their way.

Warsh has suggested a modernized Fed–Treasury accord to reset boundaries blurred by high deficits, elevated debt levels, and the Fed’s post‑crisis balance sheet expansion. Drawing on the 1951 accord — which restored Fed independence by ending its obligation to cap Treasury yields — he argues today’s high‑debt environment and a balance sheet above $6 trillion warrant a similar effort to re‑establish clarity between fiscal and monetary roles.

Warsh’s comments suggest the accord would emphasize transparency and coordination without fully subordinating monetary policy to fiscal needs. Key elements could include:

• Joint Communication on Balance Sheet and Issuance Plans: A new accord could have the Fed and Treasury jointly communicate balance sheet objectives and debt‑issuance plans to give markets clearer guidance during quantitative tightening (QT). Warsh argues this transparency would help the Fed move toward a sustainable balance sheet size while reducing reliance on reactive policy tools.
• Narrower Fed Footprint in Markets: The accord might limit the Fed’s use of quantitative easing (QE), restricting large‑scale bond buying to true crises and shifting holdings toward shorter‑term Treasuries. Warsh favors a smaller balance sheet to re‑establish boundaries between monetary and fiscal policy. The Fed’s current long‑duration tilt — holding significant amounts of long‑term Treasuries and mortgage-backed securities (MBS) — would likely be reduced gradually over several years.

It May Take Time to Meaningfully Shrink the Fed’s Balance Sheet

Source: LPL Research, Bloomberg 02/10/26
Disclosures: Past performance is no guarantee of future results.

• Addressing Fiscal Pressures Without Yield Caps: While a concern is that this could evolve into “yield curve control” — where the Fed caps long-term rates to manage debt costs — Warsh’s hawkish stance on balance sheets suggests initial restraint. And you could arguably make the case that this is already happening.
  • The Fed is notably underweight Treasury bills and significantly overweight in long- duration bonds. Currently, Treasuries with maturities of 10 years or more make up nearly 38% of the Fed’s holdings, compared to just 18% of the outstanding Treasury market. While other sectors are roughly aligned, this imbalance reflects the Fed’s reinvestment strategy and its historical focus on longer-dated securities. This skew toward the long end of the curve already resembles aspects of an “Operation Twist” in terms of duration extension.
  • Perhaps instead, the accord might prioritize fiscal discipline by aligning policies to handle 6–7% deficits (as a percent of GDP) in non-crisis times, potentially through creative maneuvers like adjusting Treasury issuance mixes (e.g., more T-bills), while the Fed steps back from long-end support. That said, if market dysfunction arises (e.g., auction failures or rising term premiums), it could open the door to targeted interventions, though Warsh has emphasized avoiding permanent tools that blur independence.
• Safeguards for Independence: To counter concerns about eroding Fed autonomy, the accord could explicitly delineate roles, such as barring the Fed from direct deficit financing while allowing coordination during normalization. Warsh has framed this as a response to the Fed “losing its way” by straying into fiscal territory, aiming to refocus on core mandates like price stability and employment. Critics warn it risks heightening political pressure or bond volatility if perceived as fiscal dominance

Of course, Congress won’t sit idly. Bipartisan concerns over Fed independence could spark pushback. Oversight hearings, resolutions, or conditions on Warsh’s confirmation could force modifications, especially if the accord requires legislative tweaks for durability. Congress holds veto power over statutory changes, making a “skinny” version more feasible than an ambitious overhaul.

Bottom Line: Overall, this accord would likely be a formal, public framework announced jointly by Warsh (if confirmed, as we expect) and Treasury Secretary Bessent, focusing on predictability to manage debt without immediate aggressive easing. Market reactions could include steeper yield curves initially, with dollar strength if seen as pro-sound money, but bear steepening if independence fears dominate. The exact terms remain ambiguous, as Warsh and Bessent have not detailed them, but it could represent a shift toward integrated yet bounded policymaking in a high-debt era.

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: #1063251

Picks and Shovels in U.S. Housing Market

Thomas Shipp | Head of Equity Research
Last Updated: February 10, 2026

Additional content provided by Tucker Beale, Analyst, Research.

If U.S. Housing Inflection Is Near, Look for More Than Just Homebuilders

Over the last three months, the housing conversation has warmed up again. Markets seem to be saying the next chapter could be “more activity”; i.e., more housing starts, more remodeling, more jobs coming off the sidelines as confidence improves. However, homebuilding is not a simple business. It’s an industry where politics, regulation, and public scrutiny can swing sentiment just as much as mortgage rates and household formation. Recently, two storylines have competed for attention. One is a “pro-building” narrative based on recent Bloomberg reporting that two large homebuilders were developing “Trump Homes,” a pathway-to-ownership program to address affordability concerns for first-time homebuyers (Builders Push ‘Trump Homes’ in Pitch for a Million Houses). Such a program implies a friendlier environment for construction and development. The other storyline is the kind of headline that can drive equity investors toward the exits: reports that the Department of Justice may be looking at anti-competitive practices in parts of the homebuilding ecosystem. (White House considers antitrust probe into homebuilders, Bloomberg News reports | Reuters)

Whether either headline has legs in a legal or economic sense is almost beside the point. The market takeaway is that builders can carry non-obvious headline risk, especially when an industry is concentrated and profitability is visible. Therefore, if your core view is “residential construction activity will increase,” take a page from the AI capital expenditures (capex) boom and buy the picks-and-shovels businesses (i.e., building materials, product manufacturers, and distributors), rather than the homebuilders themselves. These are the companies that make and move the products that show up on every job site, regardless of which builder wins the subdivision. Performance of relevant S&P 500 industry indexes suggests the market agrees, as construction materials, building products, and distributors have outperformed homebuilders and the S&P 500 over the last three and 12 months.

Building Products, Construction Materials, Distributors, Homebuilders, and S&P 500 Price Performance

Source: LPL Research, Bloomberg 02/06/26
Disclosure: Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested in directly.

Source: LPL Research, Bloomberg 02/06/26
Disclosure: Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested in directly.

Builders Have Baggage — Land, Incentives, Politics

Homebuilders can be great businesses in the right part of the cycle, and we appreciate the fact that most homebuilders are better businesses than they were in the last big housing upcycle pre-Global Financial Crisis (GFC). However, results remain influenced by several drivers beyond just “housing demand,” including:

• Land economics: Lot costs, option structures, and entitlement timing can matter as much as sales volume.
• Incentives and affordability: The builder can keep headline pricing stable while quietly giving up margin via mortgage buydowns, upgrades, and concessions.
• Cycle timing: A builder’s profits can be extraordinarily sensitive to small changes in cancellation rates and closing schedules.
• Regulatory optics: If regulators decide an industry looks “too concentrated” or “too profitable,” valuations can re-rate quickly, regardless of near-term demand.

In other words, buying homebuilders is often a bet on how housing demand expresses itself (pricing vs. incentives, regional mix, land bank strategy), not just whether demand exists. Acknowledging that homebuilding equities will generally benefit from increased housing demand, we suggest expanding your watchlist to include additional businesses that stand to benefit.

More Building Activity = More Materials and More Distribution Throughput

If you dig deeper beyond headlines and typical investment playbooks, the most reliable beneficiaries of increased housing activity are often the companies that supply the job site, either by making building materials and products or moving them efficiently to contractors and builders. Building materials manufacturers and distributors sit in a different part of the value chain. Their economics are typically more tied to unit volume and turnover, repair and remodel activity levels, and content/product mix. These drivers of sales growth and profit margins matter because housing can improve without turning into a new build-led housing boom. These businesses don’t need every macro variable to line up perfectly, they just need incrementally better activity, and the volume and mix can start to work.

Building materials and product manufacturers:

Manufacturers produce the core components that physically go into a home, such as roofing systems, insulation, siding, flooring, exterior cladding, sealants, etc. When activity improves, they can benefit in three broad ways:

• Volume leverage: Many manufacturing operations have meaningfully fixed costs. As utilization rises, incremental sales can carry attractive profit contributions.
• Mix and “content per home”: Even without a huge surge in starts, codes and preferences can increase the dollars of material per house.
• Performance-driven pricing: In categories where labor-saving installation, durability, and energy efficiency are important, pricing can be based on “value added,” not just commodity costs. The better product portfolios can defend price and attach more components per project by selling integrated systems.

Different types of building materials and product manufacturers include those supplying: (a) the building envelope (i.e., roofing/insulation/weatherproofing) such as Carlisle Cos. (CSL), Owens Corning (OC), and Amrize Ltd. (AMRZ); (b) heating, ventilation, and air conditioning (HVAC) and climate control systems such as Trane Technologies (TT), Carrier Global (CARR), and Lennox (LII); (c) water heating and treatment systems, such as A.O. Smith Corp. (AOS); and (d) other diversified building product manufacturers such as Masco Corp (MAS).

Building products distributors:

Distributors connect manufacturers to contractors and builders by stocking inventory, delivering to job sites, bundling SKUs, and often extending trade credit. In a housing upcycle, distribution can be seen as a direct “activity proxy” because it captures:

• Throughput growth: More jobs lead to more orders, whether new build or repair/remodel.
• Share-of-wallet expansion: Distributors increasingly try to become one-stop shops across complementary categories.
• Operational leverage: Consolidated networks can spread branch, warehouse, and delivery costs across more volumes.

Examples of distributors include QXO Inc. (QXO), privately held ABC Supply, Builders FirstSource (BLDR), TopBuild (BLD), and traditional “big box” retailers like Home Depot (HD) and Lowe’s (LOW), which have expanded their professional distribution businesses in recent years via acquisitions.

As with any supplier/wholesaler relationship, channel consolidation can drive efficiencies but also be detrimental to manufacturers, as distributors may gain bargaining power, pressuring manufacturers’ margins even when end demand improves. That’s why within these “picks and shovels” plays, it is important to focus on quality, which often shows up as product differentiation on the manufacturing side, and supply reliability and service on the distribution side.

Conclusion

The housing investment theme doesn’t have to be a binary decision based on a boom-or-bust homebuilding environment. If activity is simply trending upward, we believe there’s a compelling case for adding exposure to the companies that supply the job site, especially when political and/or regulatory noise make the homebuilders harder to underwrite. Roofing, HVAC, plumbing, and insulation aren’t glamorous. But they are necessary, and they scale with activity. Additionally, as building codes push for energy efficiency and durability, building materials and products can quietly become more valuable per home over time. If the next leg of housing demand is higher, the cleanest beneficiaries may not be the names buying land and managing incentives, but instead the businesses selling the materials, shipping the products, and helping solve the job site’s daily problems.

Important Disclosures

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

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

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

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

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

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