Inflation

This paper presents the case for emerging market (EM) allocations within the broader context of global investment strategy. In a period of heightened geopolitical complexity—spanning the 2026 US-Iran conflict, challenges to globalization, political transformation and ongoing great power competition—we believe the case for engaged emerging markets exposure has never been stronger.

The Q2 earnings season is off to a rollercoaster start. The big banks collectively reported strong numbers, boosted by active capital markets and another impressive set of sales & trading revenue. And it was the usual chorus of bank CEO macro commentary:

Although economic conditions did not change much between the first and second quarters, investors were far more bullish in the second quarter.

After a difficult start to the year, investor sentiment reached a low point near the end of March as concerns around inflation, geopolitics, and rising interest rates weighed on risk assets.

What were the key takeaways from last month’s numbers? Our corporate bond specialists look back at the market’s performance and provide incisive commentary to help you make sense of what drove the market—and what may be on the horizon for fixed income investors.

Investors should consider where in the capital structure they are best compensated for risk. Equity may offer income with upside potential from active asset management, whereas debt may offer income with downside mitigation.

The first half of 2026 reinforced an important lesson for fixed income investors: Tax-loss harvesting opportunities don’t always arrive at year-end, often appearing during short periods of market dislocation when interest rates rise, new-issue supply increases or investor sentiment shifts.

The tech-heavy NASDAQ benefited from a semiconductor rebound and renewed enthusiasm for AI infrastructure names. The Dow, weighted more toward “old economy” stocks than high-growth names, captured none of last week’s gains.

LPL Research examines how sticky inflation, Fed leadership changes, and AI-driven borrowing are shaping the fixed income outlook for 2026.

The Fed's recent shift into a more hawkish mode creates concern about banking profits later this year, but second-quarter results are seen strong thanks to IPOs, mergers.

Regardless of how inflation is measured or debated, households continue to feel the cumulative effect of higher prices. The cost of goods and services have risen at a high pace over the past several years, and wage growth has not always kept pace evenly across households.

After a wild last 12 months in a technology stock boom – and more recent volatility – the question du jour, in our view, is not whether AI is transformative.

Every year in early July, we update our interactive Periodic Table of Commodities Returns to reflect the performance of raw materials in the first six months of the year. Maybe I’m biased, but I believe it’s one of the clearest snapshots of the commodities landscape you’ll find anywhere.

While tariff uncertainty hasn’t completely disappeared, it has diminished, and firms are feeling less uncertain about the future.

Over the past few weeks, data has continued to point to a U.S. labor market that is healing after showing signs of weakness starting in late 2024 and persisting for nearly the entirety of 2025—a condition that spurred the Fed to cut rates even as inflation remained stuck above its 2 percent target.

The first wave of upgrades came after the AI hyperscalers reported, by and large, strong earnings. But most of the improvement has stemmed from the rest of the non-financials index, with analysts quadrupling their one-year aggregate EBITDA (earnings before interest, taxes, depreciation, and amortization) growth expectations, from 5% at the end of January to more than 20% as of 30 June.

If you knew you were standing inside a stock market bubble, you wouldn’t be standing in it for long. You’d sell. So would I, and so would everyone reading this. And if spotting market bubbles was something everyone could do in real time, the bubble couldn’t form in the first place.

Despite renewed geopolitical tensions in the Middle East, markets continue to display remarkable resilience. Major equity averages sit within striking distance of new all-time highs while oil, perhaps the biggest surprise of the year, remains anchored in the low $70s despite renewed hostilities.

As we move toward the mid-term elections, many are making the argument that “democracy is at risk.” We get politicians making this argument, but when supposedly sober political and economic analysts start to make it, we do get worried.

Given how crucial the fixed income sleeve can be to one’s portfolio, the recent concerns over inflation have caused many advisors and investors to rethink how they go about their exposure. This includes debating over active and passive funds, and reevaluating the type of bond duration that is most attractive at this moment.

The Federal Reserve’s plans for interest rates in the second half of 2026 appear very much up in the air. That said, advisors and fixed income investors may want to renew their focus on short duration bonds and related ETFs.

What makes this earnings setup truly unique is the behavior of Wall Street analysts over the last 90 days. Because corporate guidance tends to be conservative, analysts historically cut estimates ahead of time.

This week a number of articles caught my attention. The only thing that ties them together is their impact on the US and global economy. Economic anomalies: things we were not looking for but show up and force us to pay attention. Today in the summer heat, let’s take a look at a few of them.

Despite geopolitical headwinds, the broader macro backdrop remained constructive in the first half of the year. Economic growth proved resilient, consumers kept spending and the S&P 500 gained 10%. That favorable mix drove strong earnings growth, with S&P 500 earnings rising 27% year over year in 1Q26, led by the tech sector.

Markets enter the second half of 2026 facing a familiar wall of worry—geopolitical conflict, oil prices, inflation, Federal Reserve policy, and questions around the durability of an AI-led equity rally. Yet the economic backdrop still looks resilient: growth remains solid, inflation has moderated, unemployment is reasonable, and market leadership appears to be broadening.

Fixed income experts James Donahue, John Lloyd and Mike Talaga revisit the levels of supply related to the AI buildout and explain why they remain cautious towards investment grade tech issuance.

Discover the top 10 most-read charts from the first half of 2026, covering historic market valuations, record margin debt, recession indicators, and global index performance.

If there's one thing you should take away from it, it's this: these six measures rarely move together. When they have, twice in 250 years, the country entered a period of real upheaval. Right now, they're moving together again.

For investors who have been tracking this space, the signing is a continuation of a policy architecture that has been assembling with surprising speed.

The sharp correction in gold prices during the first half of 2026 has left many investors wondering whether the precious metal's bull market has come to an end. According to Money Metals' Mike Maharrey, however, the market's recent weakness is largely a matter of perspective.

The Great Moderation has given way to a more volatile era, where inflation shocks and market dispersion favor flexibility and diversification.

Central bankers expect de-dollarization to continue over the next several years, with gold and other currencies taking on a growing role in the global monetary system, according to a survey by the Official Monetary and Financial Institutions Forum (OMFIF).

One of the bigger questions facing advisors and investors right now revolves around credit. Inflation, volatility, and Fed rate hikes all loom, potentially heightening credit risk for portfolios. Navigating that risk may be a crucial task in the second half of this year.

Assessing the year so far, much of the portfolios’ declines have been a compression of valuations, not a deterioration of earnings. For many of our holdings, the two have moved in opposite directions. Revenues, profitability, and cash flow have continued to build, even as the multiples placed against them have fallen.

ClearBridge Investments: Although markets often pause to digest after large gains, history suggests these episodes usually prove fleeting, meaning major indexes could move higher in the second half of 2026.

As economies become increasingly electrified and power demand grows, the transmission, storage and infrastructure needed to support reliable electricity delivery are evolving. In our view, these trends are creating attractive opportunities across the technologies and infrastructure that underpin the energy transition.

For much of the last decade, investing felt relatively one dimensional. Falling inflation, near zero interest rates and abundant liquidity rewarded long duration growth assets, compressed dispersion and made passive exposure difficult to challenge.

The June jobs report underscored our thesis that while the labor market remains in the 'economic plus column,' some of the prior months' increases in new hiring seemed a bit too high.

Over the first half of 2026, markets faced some expected — and unexpected — tailwinds and headwinds, ranging from geopolitical developments, blockbuster corporate earnings, increasing artificial intelligence (AI) scrutiny, resilient economic data, and a new Federal Reserve (Fed) Chair.

Royce Investment Partners: In this second quarter recap, Francis Gannon discusses how US small-and micro-cap stocks have continued to lead the US equity market in a robust period for equities.

The shortened trading week brought the second quarter of 2026 to a positive close. Stocks ended slightly lower for month, but closed the quarter on a nice uptick. The US and Iran resumed peace talks, helping stocks push higher.

It feels like gold has tanked this year, but the yellow metal was only down about 7 percent through the first six months of 2026. The sharp price rally to kick off the year exacerbated the scope of the ensuing correction. Gold is down about 28 percent from its record highs.

The first half of 2026 has provided a considerable amount of news for investors to digest. Notably, equity markets were higher by nearly 10%, oil prices spiked over 50% before retreating nearly back to where they started, there is a new Chair of the Federal Reserve in Kevin Warsh, and AI infrastructure spending surged.

Stocks staged a powerful recovery in Q2. The S&P 500 gained 15% and closed near record highs as oil round-tripped back to pre-conflict levels, AI enthusiasm returned, and the rally broadened well beyond the handful of names that led the market for three years.

AI may reshape the labor market in ways that are difficult to predict, and it won’t be the first time this has happened. In the short term, the labor market appears to have stabilized and there are some early signs of acceleration.

Global equities rebounded in the second quarter as confidence in the AI investment cycle strengthened. As the third quarter begins, we believe markets have become priced for a smooth and profitable AI build-out, leaving little margin for error. June’s sharp sell-off in the Magnificent Seven stocks underscored how quickly sentiment can shift when crowded AI trades are priced for near-flawless execution.

Chris Galipeau discusses high-conviction insights that go beyond media headlines.

Second-quarter 2026 markets were driven by the Iran conflict, which disrupted oil flows and spiked prices before easing after a partial Strait of Hormuz reopening. Focus then shifted to new Fed Chair Warsh’s reforms and SpaceX’s high-valuation IPO. The U.S. economy remains stable with moderate growth and rising inflation. Markets are up, led by AI-driven semiconductors, though risks and uncertainties persist.

The June employment report’s headline readout was softer than expected, but the details reinforce my view that the U.S. economy remains on a stable footing. Headline payroll growth disappointed, yet the previous two months—which had surprised to the upside—were revised lower, bringing hiring back toward a pace that is far more consistent with a mature expansion.