As summer winds down and September begins, investors are navigating a market shaped by strong corporate profits, debates about the promise of artificial intelligence (AI), evolving monetary policy expectations, and ongoing geopolitical conflicts. While volatility has increased at times, the backdrop for investorsremainsfundamentally well supported.
One of the most important pillars supporting the backdrop for the stock market has been corporate profits. Second quarter earnings growth for the S&P 500 is tracking to a stellar 31% excluding mark-ups of investment holdings, while analysts continue to raise forecasts for the second half and 2027. Solid earnings growth across a broad range of sectors has strengthened the fundamental case for stocks. If not for large non-recurring charges by two healthcare companies, all 11 S&P sectors would have grown earnings by 9% or more in the quarter.
At the same time, investor attention hasremainedsquarely on AI. Recent results and commentary from major technology companies have reinforced their confidence that AI investment will drive innovation and profitable growth, even as market participants debate potential payoffs. Strong outlooks from leading technology companies, including the world’s largestcompanyNVIDIA and some software firms perceived as vulnerable to disruption, have helpedmaintaininvestor enthusiasm and put a floor under most AI stocks.
Overall, weremainconstructive on the stock market outlook, supported by robust and broadening corporate profit trends, a resilient U.S. economy, and continued AI innovation. Asappropriate, investors may want to consider above-target weightings in stocksrelativeto bonds, while considering an allocation to diversifying alternative investments to help mitigate potential volatility as midterm elections approach and monetary policy and geopolitical uncertainty remain elevated. Also consider stocks have historically lagged in September and early October, though less so after a strong eight months.
For fixed income investors, with inflation still sticky and rising odds of a Federal Reserve rate hike, we continue to emphasize high-quality bonds while limiting interest rate sensitivity. Municipal bonds may offer compelling income potential and provide diversification with yields elevatedrelativeto recent history.
In sum, while higher interest rates, ongoing geopolitical conflicts, and midterm election-related policy uncertainty may create short-term market swings,maintaininga disciplined, diversified investment approachremainsthe most effective way to navigate a dynamic market environment. We will continue tomonitormarket fluctuations to take advantage of potential opportunities that mayemergeafter Labor Day.
As always, please reach out to your Perennial Financial Advisor with questions. Thank you for your continued trust.
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This material is for general information only and is not intended toprovidespecific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks includingpossible lossof principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors aregenerally regardingthe corresponding market index. Indexes are unmanaged statistical composites and cannot beinvested intodirectly. Index performance is not indicative of the performance of any investment anddonot reflect fees, expenses, or sales charges. All performance referenced is historicalandis no guarantee of future results.
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All data is provided as ofSeptember2,2026.
All index data from FactSet.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changesin the aggregatemarket value of 500 stocksrepresentingall major industries.
Bonds are subject to market and interest rate risk if sold prior to maturity.Bond values will decline as interest ratesriseand bonds are subject to availability and change in price.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Past performance does not guarantee future results.
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This research material was prepared by LPL Financial, LLC.
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