Weekly Market Updates
Stock Market’s Wall of Worry Gets Taller
September 28, 2026
Investors have plenty to worry about as fall begins. The conflict in the Middle East continues to disrupt critical energy infrastructure and transportation routes, keeping oil prices elevated and adding uncertainty around inflation. Meanwhile, rising interest rates and the prospect of additional rate hikes from the Fed could contribute to near-term market volatility. The enormous capital being committed to AI raises questions about the returns on that investment.
What's Holding Up Record Margins?
September 21, 2026
For decades, operating margins (earnings before interest and taxes, or EBIT, divided by sales) behaved like a cyclical series. When margins rose well above trend, the forces of competition, input costs, capacity additions, and customer pushback eventually compressed profitability. As Jeremy Grantham, investor and co-founder of asset manager GMO, famously said, “Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism.”
What History Says About Fed Hikes and Stocks
September 14, 2026
The key lesson from these prior cycles is that rate hikes do not typically derail bull markets. When rate increases coincide with rising recession risks, that’s a different story. Today, recession risks are low by all accounts. Economic growth remains solid, labor markets remain healthy (as reinforced by last week’s jobs report), and inflation, though high, is far below the peaks reached in 2022. Meanwhile, interest rates are already much higher than they were at the start of the last tightening cycle, reducing the shock value for bond portfolios in the case of modest additional increases in market-based rates like the 10-year Treasury.
Signs Point to a Normalization, Not a Crisis
September 8, 2026
The concerns underneath the move are legitimate, and dismissing them would be the wrong kind of contrarianism. We want to acknowledge them properly before explaining why we still think the market is functioning as designed. But, like Aesop’s fable about a boy who cried wolf, calling every orderly sell-off a crisis is unhelpful. We don’t think we are there yet, but debt and deficit trajectories are unsustainable on this current path. Something will need to be done. The good news is that we were in a similar situation in the 1990s, and Congress acted. There are some similarities, but differences as well.
The Cash Flow Case for Value
August 31, 2026
Should the recent value rotation be viewed as a regime shift-driven change in market preference, or a simple reversal trade? We think there is a compelling case to be made for the former. In a regime of higher interest rates and stubbornly above-target inflation, the market is increasingly focused on capex intensity, free cash flow conversion, and the cost of capital. Therefore, it makes sense that companies with visible cash generation have broadly regained relative appeal. This does not mean “growth” stocks cannot work. After all, growth is a core component of determining intrinsic value for a diligent stock operator. It simply means investors are less willing to pay premium multiples for earnings streams that require rising amounts of reinvestment to sustain in a “higher for longer” interest rate environment.
Stock Market Tug of War: Earnings vs. Rates
August 24, 2026
Second quarter earnings results — and it seems fair to call them a blowout — have increased our confidence that the earnings outlook can support stocks over the balance of 2026. Not only has the pace of earnings growth surprised us (we expected a percentage increase in the high 20s), but the guidance was good enough for analysts to raise estimates for the second half and 2027.
Shifting Leadership in Global Growth
August 17, 2026
Global business activity is showing signs of stabilization, but beneath the surface, the world economy remains divided. Growth momentum has improved in several major developed economies, led by a stronger U.S. expansion and a tentative recovery in parts of Europe, while activity across several large emerging markets has cooled from the rapid pace seen earlier this year. Against this backdrop, investors must also contend with lingering vulnerabilities in the global financial system, including Japan's outsized role as one of the largest foreign holders of U.S. Treasury securities, a reminder that shifts in monetary policy or investor behavior abroad can have far-reaching consequences.
Municipal Bond Outlook: Why Carry Is the Strategy
August 10, 2026
The municipal bond market enters the second half of 2026 in a familiar but underappreciated position: absorbing record supply, supported by resilient demand, and operating under a Fed that we expect to remain on hold for the balance of the year. That combination doesn't produce dramatic price returns, and it doesn't need to. With tax-equivalent yields for investment-grade municipals still sitting in the top quartile of their 10-year history, this is a market where the coupon does the heavy lifting. For investors who have spent the last several years waiting for a "better entry point," the second half of 2026 is a reminder that in fixed income, the entry point is the yield. And the yield remains generous.
Constructive on Stocks in the Second Half as AI Debate Continues
August 3, 2026
The S&P 500 settled a whirlwind July moderately lower but maintained healthy year-to-date gains. Just one month into the second half, some of our key market themes cited in LPL's Midyear Outlook 2026 wasted no time making themselves known.
Can Hyperscalers Earn Their AI Ambitions?
July 27, 2026
The hyperscaler AI capex cycle is not easily classified as either a bubble or a straightforward software growth story. The more useful framing is that the largest cloud platforms have become something of a hybrid business model that is part software platform, part digital infrastructure network, part capital-intensive industrial system. Our hypothetical “average hyperscaler” scenario analysis provides just a few directions this hybrid business model could go in terms of returns on invested capital.
China Holds Keys to Post-War Oil Prices
July 20, 2026
What do we know about China’s economy? China’s June trade data offered another reminder that the country’s growth story remains uneven beneath the surface. Crude oil imports fell sharply, dropping to their lowest level in nearly a decade as geopolitical disruptions in the Persian Gulf collided with softer domestic demand. The decline suggests refiners remain cautious about inventory accumulation, particularly given uncertainty surrounding shipments through the Strait of Hormuz, a critical artery for roughly half of China’s crude imports. While markets continue searching for signs that Beijing may step in to rebuild strategic stockpiles, the latest figures point to a demand backdrop that remains sluggish despite ongoing policy support measures.
Keep Calm and Clip Coupons
July 13, 2026
Coming into 2026, we expected inflation to move closer to the Federal Reserve’s (Fed) 2% target, the Fed to cut rates by roughly 75 basis points (bps), and Treasury yields to drift lower. Instead, the first half delivered three stress tests in rapid succession: a leadership change at the Fed, a geopolitical shock that sent oil prices and yields surging, and an AI buildout that is having a measurable impact on the corporate bond market — with the Fed leadership transition among one of our key themes for the balance of the year.
Has Stock Market Exuberance Become Irrational?
June 29, 2026
The SpaceX IPO sparks the exuberance question. The powerful rally and the blockbuster initial public offering (IPO) of Elon Musk's SpaceX (SPCX) have sparked the question whether market optimism has become excessive. To quote the thirteenth Chair of the Federal Reserve, Alan Greenspan, who passed away just one week ago and in 1996 famously asked: "How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions?"
Kevin Warsh Could Shake Up the Fed
June 22, 2026
Kevin Warsh, the new chairman of the FOMC, has long been critical of forward guidance, which is the Fed’s practice of explicitly signaling the future path of interest rates (e.g., “rates will stay low for an extended period” or publishing a projected path for policy rates). His concern is that the guidance could give the impression that policymakers might have a high degree of confidence about the future path of the economy and rates. Warsh tends to view this as misleading since macroeconomic conditions, especially inflation shocks, are inherently uncertain, so locking in a path risks being wrong.
Introducing the IPO Class of 2026
June 15, 2026
The U.S. initial public offering (IPO) market appears to be entering one of its most consequential periods in years. After a long drought following the 2021 issuance boom, a healthier macro backdrop, improved risk appetite, and a long queue of mature private companies have reopened the new-issue window. The potential 2026 class is unusual not only because of the number of companies considering public listings, but because several would be large enough to matter for major equity indexes, passive fund flows, and the broader market narrative around artificial intelligence (AI).
Is Bad News Already Priced into the Bond Market?
June 8, 2026
Since the onset of the Iran conflict (through last Friday’s close), the U.S. Treasury curve has experienced a meaningful bear flattening with front end yields rising more than back-end yields. The 10-year Treasury yield has increased by approximately 60 basis points (bps), while the 2-year yield has risen by 77 bps. These moves represent a swift repricing that incorporates several factors: rising inflation expectations tied to energy price volatility, an increase in compensation demanded for uncertainty (known as term premia); and a fundamental reassessment of the path for short-term policy rates.