Outlook 2026: A Counterbalance to Doom-and-Gloom Headlines
A modest slow down for the U.S. economy next year, according to LPL Research, but there’s still good news ahead.
The LPL Research team recently released its Outlook 2026 publication and it is a counterbalance to the gloom and doom headlines you are probably reading right now.
Economic Forecast 2026: Modest Slowdown, No Recession Expected
Here are some of the headlines. The Research team thinks the U.S. economy will experience a modest slowdown in early 2026, but will rebound later in the year.
The reason? Underlying resilience from AI-driven investment and fiscal spending, that should offset weaker household activity.
The LPL outlook also predicts there will be no recession next year.
Stock Market Performance: Can the Bull Market Continue in 2026?
That should provide more steam for the bull market: just not the kind of steam that’s powered the train for the past 3 years.
The S&P 500 Index was up 24% in 2023, 23% in 2024, and 15% this year, with two weeks left in the year.
Historically, the Index has been up 15% or more for three consecutive years only 8 times in the past 100 years. In 4 of those times, the Index kept running higher in the 4th year. In the other 4, it fizzled out, and returns were negative.
AI, Interest Rates, and Valuations: Key Market Drivers for 2026
LPL Research contends that the enthusiasm over AI is a long way from fizzling out, and that should fuel the market higher in 2026, along with easing monetary policy, in the form of continued interest rate cut.
However, valuations are running high, and next year is a mid-term election year, which tends to increase volatility.
LPL has a year end target range for 2026 of 7,300 to 7,400 on the Index. That would be about an 8% to 9% gain from where the Index sits now.
Bond Market Outlook 2026: Income Opportunities as Rates Decline
As far as other asset classes go, LPL believes bonds continue to offer compelling income opportunities, with starting yields still elevated relative to historical norms.
They write that 10-year treasury yields are anticipated to remain between 3.75% and 4.25% in 2026.
As the Fed continues to lower short-term rates, returns on cash may continue to decline, making high-quality bonds with intermediate-term maturities more attractive for long-term investors.
Alternative Investments: Real Estate and Private Equity
There is also reason for some investors to look at alternative investments like real estate and private equity.
We will get into that in a future webinar in January. Be on the lookout for that.
Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.
