Factor-Based Investing

The AI capital expenditure cycle remains solidly on track to eclipse the telecom boom of the late 1990s and become the largest investment cycle since the railway buildout of the 19th century in inflation-adjusted terms. T

While long-term interest rates have been trending higher driven by a combination of persistent inflation, Fed uncertainty and geopolitical conflict, earnings growth this year has been very strong. If the trend continues, earnings could continue to help equity markets outpace rising interest rate and inflation risks.

Two things are worth considering that will dramatically impact the stats moving forward, and neither of them existed as a factor a generation ago. Alternatives to a four-year degree are getting more government support too. Workforce Pell Grants, once reserved for traditional colleges, now extend to short-term job-training programs.

Investors remain cautious despite bullish positioning, as rotations curb speculation while record margin debt and high equity allocations raise longer-term risks.

Investors are warming to systematic processes in bond markets. In this new approach, a dynamic multifactor process drives the investment decisions, using predictive factors with demonstrable links to outperformance.

High-net-worth investors and institutional managers continue to allocate heavily to muni bond ETFs to lock in attractive yields.

July 2026 was a flattish month for markets. The S&P 500 index was down slightly. Value did well, while momentum did poorly. Smallcaps, midcaps, and emerging markets, all of which have been the year’s best performers, had a bad month. Commodities, driven largely by oil prices, led the pack, as the fragile ceasefire in Iran failed to hold.

The numbers are in, and the story of ETF adoption goes on undeterred. In July, ETFs saw their third month this year of asset inflows exceeding $190 billion. If 2025 was a record-breaking year for ETF asset creation, 2026 is promising to upstage it.

LPL Research highlights strong corporate earnings, AI-driven growth, and a favorable equity outlook while monitoring inflation, oil prices, and risks.

State Street's July Flash Flows report highlights record ETF inflows, and a major rotation into value and dividend strategies.

The latest earnings reports from Big Tech have laid bare a growing divide in the market's appetite for massive AI spending.

Advisors and investors of all kinds are used to closely watching the outcome of each of the Federal Reserve’s meetings, given how critical interest rates are to equity and fixed income markets alike. However, the recent July Fed meeting was particularly crucial. Many were uncertain what direction the central bank would go with interest rates.

Mega-cap tech stocks have helped large caps dominate small-cap ETF flows and performance for years. However, this year a shift is taking place. In 2026, small-cap index ETFs are outperforming their large-cap peers as the market has broadened out.

Schwab Sector Views is our six- to 12-month outlook for stock sectors, which represent broad sectors of the economy. The Schwab Center for Financial Research (SCFR) combines a factor-based approach with a market and economic assessment to determine the ratings.

LPL Research explores whether hyperscalers can generate attractive returns on massive AI investments through a framework focused on ROIC, growth, and capex.

In part two of AB’s “Build a Better Path” Disruptor SeriesTM, we shifted from diagnosing the challenge of long-term investing to a potential approach for solving it. With practical, actionable steps, investors have the potential to translate the concept of improving up/down capture into strategies aimed at improving portfolio design.

A continued escalation in the Middle East, where the Iranian-backed Houthis joined the conflict in an attempt to disrupt Saudi Arabian crude shipments that pass through the Red Sea via the Bab-el-Mandeb Strait, drove oil prices higher, while new tariff announcements and Alphabet's earnings release created headwinds for equities.

As the Q2 earnings season kicks into high gear, market sentiment around the AI trade is undergoing a critical sanity check. Alphabet’s second quarter results last week served as a barometer for how Wall Street is weighing artificial intelligence investments against current profitability.

June may have proven to be a difficult month for silver investors, but it’s likely far too soon to give up on the precious metal. To better understand this, it’s important to contextualize why silver’s price is struggling and why the metal’s long-term opportunities are still there.

Equity markets have shown resilience amid persistent headwinds, supported by index evolution and earnings strength

Electricity demand is surging all over the world. To meet this demand, vast investments in power generation need to be made, and grids need to be overhauled and expanded. Ramping up electricity generation and delivery is extremely expensive, and electricity prices have spiked up throughout much of the developed world.

From severe wildfires in northern Ontario to record heat across Europe, extreme weather is back in the headlines. Such events are becoming more frequent and intense, and the risks associated with them are testing the limits of insurability. With our research partners at Columbia Climate School, we examine how strains on the insurance system can transmit climate-related risks through the capital markets.

Inflation remains above target, especially the Federal Reserve’s preferred core Personal Consumption Expenditures (PCE) inflation measure, as choppy data have challenged the view that disinflation will proceed smoothly.

The prime culprit was renewed questioning of the artificial intelligence (AI) buildout given the increasing amount of capital investment needed to bring it to life and the corresponding costs for those who use the technology weighed against its potential productivity benefits.

Lock, stock and barrel, a British phrase, originally referred to the three essential components of a firearm. Over time, it evolved into shorthand for the whole package. When tensions flare in the Middle East, the global economy often feels the consequences lock, stock and barrel.

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

LPL Research analyzes China’s declining crude imports, inflation risks, and the resilient U.S. economy driving above-trend growth.

VettaFi’s Midyear Market Outlook symposium Thursday saw industry leaders take on the big questions. Where is the market going? How should investors and advisors navigate uncertainty and potential volatility? Leaders from Fidelity Investments and Invesco both joined for one of the early segments, focused on innovative U.S. strategies.

The second-quarter earnings season kicked off last week with a resounding statement from Wall Street, led by stellar results across the nation's six largest banking institutions.

I’ve been writing about inflation more in recent months and quarters because inflation has become the major driver of the US macroeconomic landscape. This week, we take a deep dive into inflation and interest rates, and at the end, I talk about why I am buying gold for my grandkids.

It seems to be the end of the Great Moderation Era for the U.S. economy. The Great Moderation Era—which marked most of the two decades leading up to the COVID-19 pandemic—is drifting away into what we call the new Temperamental Era.

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

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

It has been an eventful six months, and we are delighted that the Equity Dislocation Strategy has risen to the occasion. The Strategy generated a 9.05% net return in the first half of 2026, compared with a 1.3% return for MSCI ACWI Value minus MSCI ACWI Growth, a broad proxy for the value-growth spread.

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.

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.

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.

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.

The AI capex risk profile has gotten sharper since then, and the argument needs tightening in a few places. The bull case and the tail risk are now the same buildout, but they are running in different directions.

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.

Russell Investments is getting new owners. An investor consortium led by B Capital, a global multi-stage investment firm, has agreed to acquire the asset manager from TA Associates and Reverence Capital Partners. The group also includes the California Public Employees’ Retirement System (CalPERS), according to a Thursday press release.

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

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 capital markets have become an increasingly complex space for investors, complexities that are heightened by the sheer number of ways one can invest.

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.

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.

Federal estate taxes may not affect most households, but state death taxes can still be significant. Learn key planning considerations and strategies to help preserve wealth.

One should always take government data with a grain of salt. But if we aren’t going to reject it outright (if we do, we have nothing at all to go on), we should at least analyze it with a microscope. The headlines touted by your mainstream pundits almost always miss the real story.

At VettaFi, we’ve been talking a lot about bottlenecks as a concept. Some of the brightest equity market opportunities for capital growth are tied to bottlenecks in a supply chain-context.

Former Fed Chair Alan Greenspan’s passing has brought a stream of retrospectives on his approaches to managing the economy. He erred on the side of parsimony, favoring short public statements. Greenspan’s vague communication style offered little clarity over the future path of interest rates.

As growth stumbled, the S&P 500 Momentum Index captures a 7.5% gain in June and a 44% gain in the second quarter.

A strong quarter across major indexes. The second quarter is winding down and what a quarter it has been with the S&P 500 up 12.6% quarter to date, while the Nasdaq-100 and Russell 2000 are both up over 20%. Despite some twists and turns, the path of least resistance for stocks broadly remained up and to the right for much of the last three months.

Benchmarks are broken. That was the premise established in a conversation with Samarth Sanghavi, head of fixed income index product at TMX VettaFi, when the problem was first addressed in a previous article. TMX VettaFi creates innovative index solutions, and with the premise established that benchmarks are indeed broken, here is the fix.