LIVE MARKETS-LPL Financial sees cautious Fed, choppy stocks, for the rest of 2025

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

LPL FINANCIAL SEES CAUTIOUS FED, CHOPPY STOCKS, FOR THE REST OF 2025

Given economic distortions witnessed in recent months and the ongoing uncertainty surrounding policy and geopolitics, it may be a difficult time to harbor strong convictions.

That said, LPL Financial Research believes some semblance of clarity is expected to emerge in the near future.

In its mid-year outlook released this week, titled "Pragmatic Optimism, Measured Expectations," members of the LPL Research team offered their views on what’s ahead for markets, the economy, and investors in the second half of the year.

Jeffrey Roach, chief economist, sees a late-cycle slowdown taking hold as tariff impacts become more severe, labor demand softens, and "inflation reaccelerates modestly."

As Roach sees it, the Fed is expected to maintain a cautious stance, with limited room for cut rates.

Jeffrey Buchbinder, chief equity strategist, forecasts modest gains for stocks, with LPL’s year-end S&P 500 index .SPX target range at 6,000–6,100, based on $275 in 2026 EPS. (the midpoint of this range is around 3.5% below the SPX's current level around 6,275).

He thinks AI-driven capex remains a major tailwind, but tariff-related earnings pressure and lofty valuations may cap the upside. However, he also thinks pullbacks should be viewed as "selective buying opportunities."

In terms of sector recommendations, LPL is overweight communication services .SPLRCL and financials .SPSY, but underweight materials .SPLRCM and utilities .SPLRCU. LPL is neutral on the other seven S&P 500 sectors.

Lawrence Gillum, chief fixed income strategist, expects Treasury yields to remain in a 4.0%–4.5% range, driven by the "tug-of-war between slowing growth and deficit-driven supply."

As for the dollar, LPL believes it is under pressure as a result of rising global yields, trade policy shifts, and reserve diversification. However, LPL doesn't think it will lose its reserve currency status. In fact, LPL believes crypto policy developments, including stablecoin regulation, "could shape the next evolution of dollar dominance."

(Terence Gabriel)

EARLIER ON LIVE MARKETS:

WAITING FOR EARNINGS AND TARIFF IMPACT CLICK HERE

LOOK OUT FOR PRICE HIKES AS US FIRMS JUGGLE TRUMP'S TARIFFS CLICK HERE

INITIAL CLAIMS DIP EVEN AS UNEMPLOYMENT BENEFICIARIES SWELL TO COVID LEVELS CLICK HERE

U.S. STOCKS SUBDUED IN EARLY TRADE CLICK HERE

S&P 500 TRADERS TENSE GIVEN TRENDLINE, POTENTIAL JULY TURN CLICK HERE

UPPER HOUSE ELECTION A NEAR-TERM RISK FOR JAPANESE EQUITIES CLICK HERE

FORGET GUNS, EUROPE NEEDS BONDS - LEMANIK CLICK HERE

WHAT NEXT AFTER THE V-SHAPED RECOVERY CLICK HERE

CHINA-EXPOSED NAMES RISE, FTSE & DAX HIT PEAKS CLICK HERE

EUROPE BEFORE THE BELL: TARIFFS AND EARNINGS TOP OF MIND CLICK HERE

MARKETS SHAKEN, NOT STIRRED BY TRUMP'S TARIFFS CLICK HERE