Weekly Market Commentary

THE INTERSECTION OF POLITICAL UNCERTAINTY AND GLOBAL DEBT MARKETS

Kristian Kerr, Head of Macro Strategy, LPL Financial
Lawrence Gillum, CFA, Chief Fixed Income Strategist, LPL Financial

Global bond markets have sold off recently due to uncertainty surrounding key political changes most notably in France and Japan. Japan’s Prime Minister, Shigeru Ishiba, resigned last week, which adds a potential shift in fiscal policy to concerns about slowing monetary policy normalization. Additionally, France’s prime minister stepped down recently after losing a confidence vote after trying to pass a budget with austerity measures. Add concerns about ongoing fiscal sustainability issues in the U.K. and debt and deficit concerns in the U.S. and it makes sense that longer maturity bond yields, globally, have risen. France and the U.K. remain important buyers of U.S. Treasuries, so as their home market yields increase, U.S. rates look less attractive, which puts upward pressure on U.S. yields. That said, as we’ve seen in the U.S., particularly after the weaker than expected August jobs report, bond yields tend to follow the economic data. The Federal Reserve (Fed) is set to cut interest rates this week so we may be past cyclical highs. But with developed market debt levels expected to continue to increase with seemingly little appetite to reduce budget deficits, long-term bond yields may need to remain elevated to attract buyers.

Weekly Market Commentary

STOCKS ARE FOLLOWING THE MARKET’S PLAYBOOK

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial

Some of you reading this title might think this commentary is about September seasonality. Sure, seasonality is part of our playbook and is getting a lot of attention right now. We would not be surprised if volatility were to pick up some this month — even though seasonality isn’t as much of a concern during positively trending markets. The playbook we’re referring to is how the stock market has historically performed after recovering from big selloffs. It’s following that playbook closely.

Weekly Market Commentary

CALM BEFORE THE STORM: CAN THIS RALLY CONTINUE IN SEPTEMBER?

Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial

The winning streak for stocks continued in August, as the S&P 500 posted its fourth consecutive month of gains. It was an informative month for investors, as we learned that the labor market may not be as solid as expected, tariffs have had a minimal impact on inflation and margins thus far, corporate America and the consumer remain resilient, and the Federal Reserve (Fed) is likely ready to cut rates later this month. This backdrop propelled the broader market up nearly 2% last month and to its 20th record high of the year on Thursday. Friday’s inflation report revealed that consumer spending rose in July despite a slight acceleration in the year-over-year core Personal Consumption Expenditures (PCE) Price Index — the Fed’s preferred inflation gauge. The mostly in-line report had a minimal impact on rate cut expectations, with the fed funds futures market implying nearly a 90% probability for a 0.25% rate cut this month. However, the upcoming payrolls report on Friday could move the needle; anything hot on payroll gains could throw some cold water on rate cut estimates.

Weekly Market Commentary

GRAND IDEAS AT THE GRAND TETONS

Jeffrey Roach, PhD, Chief Economist, LPL Financial
Lawrence Gillum, CFA, Chief Fixed Income Strategist, LPL Financial

As central bankers, economists, and policymakers gathered last weekend in Wyoming’s Grand Teton National Park for the 2025 Jackson Hole Economic Symposium, the Federal Reserve (Fed) found itself at a critical juncture marked by political pressures, personnel changes, and internal divisions over monetary policy direction. Markets have positioned for dovish signals with 85% odds of a September rate cut, but historical patterns suggest Jackson Hole speeches often trigger reversals, as seen in 2022 when 2-year Treasury yields surged over 100 basis points following Fed Chair Jerome Powell’s hawkish remarks. The Fed’s simultaneous management of interest rate policy, personnel changes, quantitative tightening, and mounting political pressure from the White House represents an unusually complex policy environment. Fixed income investors face elevated volatility across markets as the institution that has long prided itself on independence and consensus navigates both external political pressures and internal disagreements during a period of mixed economic signals.

Weekly Market Commentary

EARNINGS SEASON DELIVERED

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial

Second quarter earnings season, which winds down this week and next, has met some of the highest expectations. Strong beat rates, big upside earnings surprises, and increases in estimates during the past four weeks were consistent themes that gave investors very little to complain about. This is a big change from first quarter earnings season in April and May, which was more muddied by tariff uncertainty. What didn’t change this quarter? Artificial intelligence investment by mega cap technology was the key driver.

Weekly Market Commentary

STOCKS SAILING SMOOTHLY THROUGH POLICY CROSSCURRENTS SO FAR

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial

We’re all ready to put the tariff talk to bed. But don’t worry. While this commentary provides an update on the tariff situation, there’s more happening on the policy front than just tariffs. Whatever policy we highlight, it’s clear that the stock market is sailing through those choppy, even unprecedented waters. Here we discuss the most important policy headwinds and tailwinds and try to explain why the stock market has been so sanguine.

Weekly Market Commentary

SEVEN TAKEAWAYS FROM A DIZZYING WEEK FOR MARKETS

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial
Lawrence Gillum, CFA, Chief Fixed Income Strategist, LPL Financial
Jeffrey Roach, PhD, Chief Economist, LPL Financial
Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial

Last week was one for the ages in terms of the number and magnitude of events and data points for investors to digest. A Federal Reserve (Fed) meeting, the monthly jobs report, and the peak week of earnings season would be enough to qualify as a busy week. But add in the U.S.-China negotiations, the August 1 tariff deadline, the U.S. Treasury Department quarterly refunding announcement, and the Fed’s preferred inflation metric, and last week gave investors as much to digest as any week in recent memory. Here we share seven takeaways for investors based on last week’s plethora of news.

Weekly Market Commentary

ECONOMY IN UNCHARTED WATERS

Jeffrey Roach, PhD, Chief Economist, LPL Financial
Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial
Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial

We believe this more complex macro environment will force the Federal Reserve (Fed) to maintain its cautious stance on monetary policy for longer than markets originally expected. One factor adding to the complexity is the post-pandemic impact on economic and financial models. Another obvious factor is dynamic trade policy. Tailwinds from improved tax policy will help businesses wade through the uncharted waters. In general, the economy should be able to successfully charter through choppiness if the average effective tariff rate stays in the mid- to high-teens.

Weekly Market Commentary

MIDYEAR FIXED INCOME, CURRENCY, AND COMMODITY MARKETS OUTLOOK: HIGHER FOR LONGER

Lawrence Gillum, CFA, Chief Fixed Income Strategist, LPL Financial
Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial

LPL Research provides its midyear bond and commodity market outlook on interest rates, Federal Reserve rate cuts, gold, the U.S. dollar, and much more.

Weekly Market Commentary

MIDYEAR STOCK MARKET OUTLOOK: PATH TO UPSIDE CLOUDED WITH UNCERTAINTY

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial
Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial

If “tariff” isn’t the word of the year for stock investors so far, then perhaps it’s “uncertainty.” Uncertainty around trade policy dominated the path of the stock market in the first half and will continue to play a large role in the second half. Tariffs influence the key drivers of stock market performance: economic and corporate profit growth, inflation, and interest rates. If stocks continue to move higher in the second half of the year, trade policy will need to cooperate. Meanwhile, geopolitics remain a wildcard. Here we provide our midyear stock market outlook, taken from Midyear Outlook 2025: Pragmatic Optimism, Measured Expectations.

Weekly Market Commentary

STRATEGIC TIME HORIZON SUPPORTS ALLOCATION TO NON-U.S. EQUITIES

Thomas Shipp, CFA, Head of Equity Research, LPL Financial

With investor focus now squarely back on U.S. equities as new all-time highs are in sight, we dig into why strategic allocations should still consider, despite recent outperformance and multiple expansion, diversification into international equities. Using a five-factor attribution analysis, we analyze the drivers of returns for U.S. and non-U.S. equities over the last quarter century, with a particular focus on what drove the U.S. to outperform non-U.S. equities so dramatically over the last 15 years. We then use that same analytical framework to create an illustrative scenario analysis to determine potential returns to U.S. and non-U.S. equity markets, showing why starting valuations matter — when looking far into the future.

Weekly Market Commentary

CHINA’S EQUITY MARKET DIVERGES: A-SHARES VS. H-SHARES

Kristian Kerr, Head of Macro Strategy, LPL Financial

Chinese equities have been a major focus for investors in recent months, with catalysts ranging from DeepSeek’s artificial intelligence (AI) advancements to tariffs and trade negotiations. However, the performance of Chinese equities has varied significantly depending on the particular equity market in question. Unlike many other global equity markets, China’s stock market is divided into distinct segments, each with unique characteristics and investor access. Understanding these differences is crucial to assessing how Chinese equities have responded to recent events and what is in store for them and emerging market equities more broadly moving forward.

Weekly Market Commentary

INFLATION’S IMPORTANCE TO FINANCIAL MARKETS CANNOT BE OVERSTATED

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial
Jeffrey Roach, PhD, Chief Economist, LPL Financial
Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial

Inflation’s effects on the economy, monetary policy, and the financial markets are wide-ranging. Higher inflation can constrain economic growth, tighten financial conditions, drive interest rates higher and even restrain stock valuations — higher inflation dampens the present value of future earnings and, historically, correlates with lower stock valuations. Will the recent encouraging reports on inflation convince the Federal Reserve (Fed) to cut rates sooner rather than later? In this week’s Weekly Market Commentary, we explore the current inflation dynamics, how stocks react within various inflation scenarios, and what sectors have rebounded the most since the initial tariff tantrums.

Weekly Market Commentary

Q1 BUYBACKS BOOST STOCKS AMID MARKET RECOVERY

Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial

There have been plenty of catalysts supporting the broader market’s recovery from the correction lows set last month. Oversold conditions fueled by indiscriminate selling left the S&P 500 with washed-out market breadth and a hard reset of its lofty valuation. First quarter earnings season came in much better than feared, and most companies unexpectedly did not pull forward guidance. President Trump's announcement of a 90-day pause on most reciprocal tariffs eased fears of an escalating trade war, while continued progress in trade negotiations further supported the risk-on rally. Steady retail buying and a slow return of institutional demand also supported the rebound. Corporate buybacks, arguably one of the less-discussed catalysts, likely provided an additional boost to the market’s quick recovery. In this week’s Weekly Market Commentary, we explore recent repurchase activity, including who is buying back stock, how much, and how buyback companies have historically performed.

Weekly Market Commentary

TARIFFS AND MARKET VOLATILITY LIKELY TO STICK

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial
Lawrence Gillum, CFA, Chief Fixed Income Strategist, LPL Financial
Jeffrey Roach, PhD, Chief Economist, LPL Financial
Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial

There has been no shortage of trade policy curveballs thrown at the market since the White House announced shockingly high reciprocal tariffs on April 2. Stocks fell sharply and interest rates spiked on that news, prompting President Trump to pivot to a 90-day reciprocal tariff pause. Since then, trade negotiations have generally progressed, albeit slowly. Then, last week, came another curveball with the U.S. Court of International Trade (CIT) ruling that essentially blocked most of President Trump’s tariffs. Here we discuss what this news means, where the Trump administration goes next, and potential market implications. The legal backdrop has shifted, but the investing landscape really hasn’t changed much.

Weekly Market Commentary

CAN EARNINGS CATCH UP TO THIS STOCK MARKET RALLY?

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial

First quarter reporting season was solid, but results didn’t offer much of a confidence boost in the outlook for the rest of the year. It wasn’t corporate America’s fault — tariff uncertainty makes it very difficult for most companies to offer an outlook that they can have confidence in. Analysts did get enough guidance to take estimates down for the rest of the year to credible levels, which is a positive step in restoring market confidence. And the top technology companies did their part by delivering very strong results while reiterating capital investment guidance that is key to driving growth in S&P 500 profits. Still, these results left us unsure as to whether earnings justify stock prices.

Weekly Market Commentary

MARKET UPDATE: TARIFF PAUSE BOOSTS SENTIMENT, FED STEADY

Jeffrey Roach, PhD, Chief Economist, LPL Financial

Investor sentiment dramatically changed after Treasury Secretary Scott Bessent and other members of the Trump administration announced a temporary pause on tariffs with China. Was that sentiment shift warranted and did anything materially change? Estimates of the effective tariff rate continue to vary and have wide confidence intervals. Volatility will likely remain as the Trump administration is interested in managing perceptions with both midterms and markets in mind. This might explain the high degree of strategic variations in trade policy. Amid the variance, what hasn’t changed is the exceptional structure of the U.S. The two main reasons we believe U.S. exceptionalism will remain — probably for a very long time — are the depth and breadth of U.S. capital markets, and the reserve currency status of the U.S. dollar (USD).

Weekly Market Commentary

BULLS ARE ON TRIAL

Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial

A busy week of earnings, trade negotiations, and monetary policy meetings left the S&P 500 down around 0.5%. Buyer fatigue appeared to be setting in at this stage of the recovery as risk appetite from positive trade headlines faded by Friday. The broader market also faced major overhead resistance and profit-taking pressure from retail investors, who have been the backbone of the rally over the last month. Earnings continued to come in better-than-feared, but “tariff uncertainty” continued to get flagged on most conference calls. The Federal Reserve (Fed) kept rates unchanged and stuck to its patient approach with monetary policy, despite notable downgrades to economic growth estimates and rising recession probabilities since their last meeting.

Bottom line, we remain neutral on equities tactically as the risk-reward trade-off does not appear very attractive right now, and we cannot dismiss the chances of a reversal lower in the coming weeks.

Weekly Market Commentary

FINDING VALUE AMONG THE MUNI MARKET MALAISE

Lawrence Gillum, CFA, Chief Fixed Income Strategist, LPL Financial

The municipal bond market faced significant volatility in April, driven by spillovers from a turbulent Treasury market. Treasury yields were pressured higher by rising inflation expectations; the Federal Reserve’s cautious policy stance, reduced foreign demand; hedge fund deleveraging, portfolio shifts toward cash, and structural illiquidity. These dynamics reverberated across fixed income markets, with municipals experiencing pronounced dislocations due to their fragmented market structure and liquidity constraints. High-grade (HG) municipal yields fluctuated sharply, with AAA benchmark yields traversing an 85-basis point (bps) range in long-end tenors. By month-end, yields ultimately rose by double-digit basis points across the muni curve. But with the dust mostly settled, in our view, value has returned to the muni market and not just for traditional muni buyers. Starting yields, which represent the best expectation of future returns, are above longer-term averages and are equally attractive relative to most taxable alternatives.

Weekly Market Commentary

SOFTER TONE ON CHINA IS ENCOURAGING, BUT SOME CAUTION STILL ADVISED

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial

The softer tone toward China from the White House, President Trump’s pledge not to fire Federal Reserve (Fed) Chair Jerome (Jay) Powell, and renewed optimism about Fed rate cuts all helped drive a strong market rebound last week. The latest advance, while encouraging, raises the bar for additional near-term gains. While LPL Research still has confidence that these trade issues will be resolved and suggests long-term investors stay the course, we would urge patience for those trying to be nimble and tactical. No trade deals, or even frameworks for deals, have been announced yet, corporate America has little visibility, and stocks are expensive for an inflationary environment. Our recently adjusted year-end fair value S&P 500 target of 5,650–5,800 only allows for 5% upside above Friday’s close. We stay neutral on equities tactically for now.