2026 Midyear Outlook:
Pragmatic Optimism, Measured Expectations
We started 2026 on a high note, although we acknowledged that “no market environment is ever permanent, and that change is always potentially around the corner.” Well change did come, and with it, volatility, perhaps in part because we assumed President Trump’s policies would simply mirror those of his prior term.
The impact of policy direction has been central to market direction this year.
Uncertainty around trade policy dominated the stock market’s path in the first half of the year and will continue to play a large role in the second half.
In the second half of the year, LPL Research expects to see slower economic growth, a weakening job market, and a slight uptick in inflation as the delayed effects of trade policy begin to take their toll. This will make things more challenging for the Federal Reserve (Fed), whose job is to keep inflation in check
and maintain maximum employment. With a full plate to balance, the federal funds rate (which affects interest rates) will likely remain higher for longer.
To learn more about the opportunities and challenges to be on the lookout for through the end of this year, read the 2026 Midyear Outlook today.
2026 Outlook: The Policy Engine
In 2025, we observed a market environment where fiscal and monetary policy decisions, rather than traditional business fundamentals, were the primary drivers of market direction. This shift means that policy influence and market momentum have become significantly more impactful in shaping market trends, often overshadowing underlying economic performance.
This policy and momentum-driven market is expected to continue, bringing with it continued volatility and significant price fluctuations. Investors should prepare for these swings by remaining patient and avoiding impulsive reactions to short-term sentiment.
The good news is that LPL Research believes policy could be a tailwind for markets. We believe monetary decision-makers will continue easing policy as economic conditions downshift and inflation remains contained. Corporate earnings may help, though there will be little room for error. Core bonds will quietly offer some value, which should be aided by a more dovish Federal Reserve. In this policy and momentum-driven market, we strongly encourage investors to look at non-correlated alternative investments.
To learn more about the opportunities and challenges to be on the lookout for, read the 2026 Outlook today.
• Link for full report, including deep analysis: go.lpl.com/outlook