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CLA OUTLOOK

Key Insights for Sound Financial Strategies

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MAY 11 WEEKLY INSIGHTS
U.S. market rebound gains momentum, but diversification remains key
  • The S&P 500 has fully recovered its March pullback, reaching new all-time highs after surpassing the 7,000 level, underscoring the strength of the current equity rally.
  • Recent momentum drove a quarterly return of 11.2%, bringing year-to-date performance to 8% for the U.S. large cap index as a return to trend has been supported by earnings growth from major companies in recent weeks.
  • Despite this rebound, global market leadership has broadened, with several equity segments outperforming the S&P 500 on a relative basis.
  • Diversification has been rewarded, as international developed (+13.6%), emerging markets (+19%), and small caps (+15.7%) all delivered stronger returns year-to-date. (Source: Morningstar)
Municipal bonds outperform taxable bonds on a nominal basis
  • Municipal bonds outperformed taxable fixed income year-to-date, returning 1.2% vs. 0.4%, benefiting from strong income carry and a better relative starting point.
  • Treasuries and investment-grade corporates delivered a more muted performance, with rate movements limiting total return relative to municipals.
  • The treasury yield curve has shifted higher, particularly in the intermediate “belly,” moving from the lower end to the upper end of our projected 2026 range.
  • The relative value of municipal bonds based on the muni-treasury ratio was highlighted three weeks ago in these same CLA key insights. 
  • Municipal bond income also benefits from federal and often state tax exemption; contact your tax and wealth team to learn more. (Source: CLA, Morningstar)
Alternative credit resilience continues after headlines subside
  • Private credit faced many negative headlines earlier this year, but underlying fundamentals remain resilient, with steady income generation and limited mark-to-market volatility.
  • Direct lending continues to deliver consistent performance — supported by floating-rate structures — especially among funds focused on larger borrowers within the middle market. 
  • The Morningstar U.S. Leveraged Loan Index is up 1.4% year-to-date compared to the bonds as represented by the Bloomberg Agg, up 0.4% total return year-to-date.
  • Gain more insights on private credit: Private Credit: Liquidity Stress Test, Not a Market Crisis (Source: Morningstar)

Develop strong financial strategies

Tune in to the CLA Outlook for 2026 as we discuss timely topics around policy, the economy, and market performance.
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Strategic Opportunities

The Big Picture for 2026

The CLA Outlook signals a turning point: stabilized inflation, growth above trend, and easing interest rates. Explore the key forces influencing portfolios in the year ahead.

  • Economic outlook

    Growth is back on the horizon after three years of higher interest rates and restrictive Federal Reserve policies, with AI helping to transform industries.

  • Fiscal policy

    The rising U.S. deficit remains a key concern as government spending continues to outpace revenues — watch for this to be a focal point heading into midterm elections.

  • Fixed income outlook

    Lower interest rates should be a tailwind to bonds in 2026, though consider credit quality and duration when building high-quality income portfolios.

  • Equity outlook

    Despite elevated stock valuations, led by tech-dominant Magnificent-7 stocks, equities remain compelling because of strong earnings growth and a robust economic backdrop.

  • Alternatives outlook

    Lower interest rates favor private equity and private real estate, while private credit can warrant caution. Manager selection and due diligence remain critical.

  • We can help

    No matter your financial position, incorporating sound tax and wealth advisory could help you achieve more.

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