Dear Valued Investor,
LPL Research is pleased to present Midyear Outlook 2026: Policy, Buildouts, & Bottlenecks. Our semi-annual
update offers a comprehensive analysis of the economic and market environment and highlights potential
implications for investors and their portfolios.
In our 2026 Outlook: The Policy Engine, we spent considerable time talking about how policy is increasingly
a driver of capital markets. The disruptions from the Iran conflict certainly served as another example of
how policy, geopolitical or otherwise, should be top of mind for investors.
So, what now? The simple answer is we expect more of the same. Policy again will be front and center as
we turn our attention to U.S. midterm elections and the uncertainty surrounding Kevin Warsh as the new
chair of the Federal Reserve. Mr. Warsh’s ability to influence his colleagues and questions around
congressional balance of power will help shape the second half of 2026.
This doesn’t mean we have lost focus on AI and corporate earnings. As a matter of fact, strength in earnings
is a key reason we have raised our 2026 stock market return expectations. While some frothiness around AI
expectations and market concentration are concerning, the earnings wave adds conviction to our forecast.
Internationally, we are less sanguine, as European economies have again fallen behind, and emerging
markets may continue to be hit-and-miss in aggregate. Simply stated, while our bias for U.S. equity
exposure remains, the variance between the U.S. and the rest of the world may be less pronounced.
All these items should be major variables of focus for the balance of the year. But the key question is: How
should investors position themselves to optimize investment opportunities? The answer is grounded in the
expectation that we believe equity markets should be constructive in the second half, but keep in mind that
midterm election years have historically made for a bumpy investment ride.
To that end, we believe bonds should remain a steadfast allocation, while market conditions persistently
point to use cases for alternative exposure, in our view. Being well-balanced is key, but it is perhaps most
important when policy shifts can cause the market to turn on a dime.
These are just some of the insights you’ll find in Midyear Outlook 2026: Policy, Buildouts, & Bottlenecks. To
get more, including considerations to discuss with your advisor, visit go.lpl.com/midyearoutlook. The
report, combined with guidance from your financial advisor, will help you navigate through market
complexities and crosscurrents and continue to work toward your goals.
Important Information
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.
All data is provided as of July 7, 2026.
All index data from FactSet.
The Standard & Poor’s 500 Index (S&P 500) 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.
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.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.
Diversification does not protect against market risk.
Past performance does not guarantee future results.
Asset allocation does not ensure a profit or protect against a loss.
This research material was 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
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