Invesco US

Last week’s Congressional testimony from Federal Reserve Chair nominee Kevin Warsh was important. Our Global Market Strategist, Brian Levitt, highlights three key takeaways from it — a combination he believes could be supportive of stocks: ▪️ The importance of Fed independence ▪️ A more nuanced interpretation of inflation ▪️ An interest in reducing the size of the Fed’s balance sheet Read the weekly market commentary. inves.co/4cyUKz0

As the conflict in the Middle East continues to evolve, some investors may be tempted to try to time the markets in response to good days and bad days. But jumping in and out of the market can erode long-term growth. Chief Global Market Strategist Brian Levitt discusses the cognitive dissonance of long-term investing and the important distinction between markets that are forward-looking and probabilistic rather than reactive and emotional. Read the weekly market commentary. inves.co/4sIVoyA

How will markets react to the conflict in the Middle East? Brian Levitt, our chief global market strategist’s stock answer for the last six weeks: “It depends on the duration of the conflict.” He thinks that may not exactly be the case. Many assumed that if the conflict lasted more than a few weeks, it would be meaningfully negative for risk assets. But markets appear to have absorbed the shock. The S&P 500 Index is now nearly flat since the conflict began in February. It seems markets crave narrative closure more than calendar precision. Are conditions getting better relative to deteriorated expectations? And the bar for relief has been surprisingly low. Even talk of a ceasefire, like we got last week, sustainable or not, has been enough to lift risk sentiment. It appears that investors, particularly after last year’s Liberation Day whipsaw, have shown little appetite for pricing in open-ended worst-case scenarios. Read our latest weekly market commentary: inves.co/41u35xD

Our Chief Global Market Strategist isn’t a military strategist, yet he’s often asked to opine on military conflicts. The current conflict in the Middle East is no exception. He tries to stay focused on interpreting what markets themselves are telling us. Right now, here’s what he’s seeing in his preferred indicators: ▪️ Shifting toward a slowdown. Our short-lived global expansion signal has shifted toward a slowdown. We’re not seeing recessionary readings, but momentum is fading. Tactically, he believes a slowdown environment argues for maintaining stock exposure, but with greater emphasis on quality and more defensive areas of the market. ▪️ Business cycle. Our preferred cyclical indicators are trending in the wrong direction, but they aren’t pointing to disaster. Taken together, a gradual but not meaningful deterioration in cycle indicators suggests that markets still appear to believe in an exit ramp and an eventual resumption of the expansion once near-term uncertainty fades. ▪️ Market bottom. Has the market already found its bottom? Major stock indexes have already corrected. However, based on our preferred market bottom indicators, the answer for now is that the bottom is likely still ahead. Read our latest weekly market commentary. inves.co/4c7WCNv

Expectations for a synchronized global expansion in 2026 have faded as the Middle East conflict increases the probability of a slowdown. But think back to a year ago in the midst of another uncertain time and the historic surge in stocks after President Trump paused his Liberation Day tariffs. So where does that leave us today? • As markets have repriced for slower growth, we favor staying invested, but for the time being have moved back toward an emphasis on higher-quality, larger-cap stocks and US dollar exposure. • Abrupt exits from stocks precisely when markets may be most prone to sharp recoveries may be poor timing. • In uncertain environments, we believe discipline matters more than conviction in any single outcome. Read our latest weekly market commentary. inves.co/4tgYfQ0

The Middle East conflict and oil supply disruption are pressuring markets and testing investor confidence. But no one knows how long the conflict will last. Right now, our preferred economic and market indicators, such as credit spreads, inflation expectations, and rate cut assumptions, have become more challenged, but they aren’t flashing clear warning signs yet. We aren’t sugarcoating the current situation, but believe investors should focus on the long-term. Read our latest market commentary. inves.co/4sbZVdk

For the first two months of the year, Brian Levitt, our Chief Global Market Strategist, was feeling confident about the conclusions in our annual outlook. There’s always the risk of a curveball like Iran and the widening Middle East conflict. ▪️ When geopolitical conflicts emerge, the first thing our strategists do is step back and consider history to establish context. Often, US stock markets have delivered positive returns in the year following major conflicts. ▪️ In the notable instances when they haven’t, the economy was already weak when the conflict began. But today, we believe the US economy remains in a relative position of strength. ▪️No one knows how long the current situation will last, but exposure to oil and other commodities may help hedge the risks of a prolonged closure of the Strait of Hormuz. ▪️ Our strategists are looking closely for signs of strain in our preferred indicators and reminding ourselves that long-term investing requires sticking with a plan even when the crowd gets nervous. Read our complete weekly market commentary. inves.co/40FjCOV

It’s helpful for investors to remember that for markets, what’s most important isn’t the quantity of news headlines, but whether or not they were expected. ➡️ Tariff decision: Expected. The tariffs that President Trump enacted last year under the International Emergency Economic Powers Act (IEEPA) were struck down in a 6-3 ruling by the US Supreme Court on Friday. Was that a shock? Not particularly. Our global market strategists now expect the Office of the US Trade Representative to pivot to a plan B. ➡️ US-Iran: Expected. Tensions have been rising between the US and Iran, but this wasn’t a surprise. These risks have been well-signaled for some time. They don’t expect these developments to derail global stock markets or end the business cycle. ➡️ Economic data: Somewhat unexpected. US gross domestic product (GDP) was weaker than expected, and core Personal Consumption Expenditures (PCE) somewhat hotter. They’d expect inflation to moderate over time, however, as productivity gains from artificial intelligence become more evident. And they don’t believe this changes the trajectory for the Federal Reserve. Read our complete weekly market commentary. inves.co/4kV2zl4

Using a Super Bowl analogy, it feels like a “heads I win, tails I win” market environment. On one side, weaker growth increases the likelihood of earlier or deeper Federal Reserve (Fed) easing. On the other side, stronger growth reinforces the view that the business cycle remains intact. Either outcome can be supportive of markets, provided inflation stays contained. Read our complete weekly market commentary: inves.co/4tHHm20

Silver linings seemed in short supply last week as silver prices plunged — along with gold, bitcoin, and software stocks. But there were some. Our global market strategists shine a light on them in this week’s market commentary: ▪️ The ISM Manufacturing Purchasing Managers’ Index climbed meaningfully into expansionary territory, and the prices-paid measure remained essentially unchanged over the prior three months. For a stock market and a Federal Reserve seeking steady activity without reignited inflation pressure, that combination is about as favorable as one could hope for. ▪️ Corporate earnings reports are revealing ambitious AI investment plans for the coming year, which should support continued strength in companies tied to semiconductors and the construction of advanced data centers. ▪️ Industrial firms reported solid results that pointed to ongoing momentum in areas such as transportation equipment, machinery, and power technology. Energy companies also delivered strong performance. ▪️ Most sectors within the S&P 500, broadly speaking, have remained positive for the year. Stock markets outside the US have also held on to gains. Read the complete weekly market commentary inves.co/4akaYcN

Two key risks were highlighted in our 2026 investment outlook: Federal Reserve independence and an artificial intelligence bubble. Last week offered some clarity on both with the nomination of Kevin Warsh to serve as the next chair of the Federal Reserve and the market’s reaction to earnings from Meta and Microsoft. inves.co/4kiidXq

The outlook for stocks still looks promising to our Chief Global Market Strategist, Brian Levitt, despite the daily onslaught of negative headlines on the Federal Reserve independence, Greenland, and ongoing geopolitical maneuvering. His key takeaways in his latest #AbovetheNoise: ▪️ Bullish on stocks - Markets are broadening despite the incessant noise from ongoing geopolitical maneuvering and Fed independence. ▪️ US Treasuries - We maintain our view that investors will likely gradually diversify away from US assets, suggesting continued US dollar weakness. ▪️ AI perspective - Artificial intelligence has challenges that require thoughtful regulation, but the potential benefits may be extraordinary. Get more in the latest edition of #AbovetheNoise. inves.co/49Xm5IE

“Nothing changes on New Year’s Day.” This famous line from a 1983 U2 song captures a truth often overlooked in financial markets — while the calendar may flip, the underlying macro and market trends rarely undergo dramatic shifts overnight. 2026 has begun much like 2025 ended: Broadening of markets continued, as global stock markets continued their upward trajectory, supported by expected strong earnings growth, anchored inflation expectations, and optimism around potential central bank policy easing. Our key takeaways from this week’s market commentary: • Energy markets - It’s unlikely that Venezuelan oil production rises meaningfully for years, and Middle East oil flow is unlikely to be disrupted. • Tariffs - The US Supreme Court delayed ruling on the legality of tariffs issued under the International Emergency Economic Powers Act. • Economic resilience - Last week’s data releases reminded us that the US economy entered 2026 on a sound — perhaps even improved — footing Read the complete weekly market commentary. inves.co/45OuDjG Invesco Distributors, Inc.

The news that broke on Sunday — the potential use of the justice system against a sitting Federal Reserve Chair — introduced a new and material challenge for risk assets, at least in the near term, until greater clarity emerges around how this situation will ultimately play out. The key takeaways from our global market strategists: • New investigation: Recent news indicates that the Department of Justice is opening an investigation into the Federal Reserve Chair. • New risks: We believe this introduces a new and material challenge for risk assets, at least in the near term, until greater clarity emerges. • Market implications: We may see upward pressure on interest rates, which would likely weigh on US stock valuations and pressure the US dollar. Read the complete weekly market commentary. inves.co/4qnyo86

Our framework suggests improving global growth. In January, we’re overweighting stocks with a tilt toward cyclicals, value, and small-to-mid caps. Get our timely investment ideas, allocation guidance, and tips to help optimize your portfolios in our monthly playbook ⏰: inves.co/3Z26nXp

Throughout 2025, there were clear storylines that captivated our attention: The question of Federal Reserve independence, the dominance of the Magnificent 7, and the trajectory of rates, to name a few. But the numbers don’t always match the narratives. In his final Above the Noise of 2025, Brian Levitt, our Chief Global Market Strategist, focuses on some of these themes. • Investors have been told to worry about Kevin Hassett becoming Federal Reserve (Fed) chair, because he’d be the first to come directly from a senior White House position without prior service as a Fed governor. But the market doesn’t appear particularly concerned about that possibility. • Many assume that the market’s success hinges on the Magnificent 7 stocks, but that narrative doesn’t match the numbers. Five of these stocks lagged the S&P 500 so far this year. Market strength appears far broader than the story suggests. • Will Fed rate cuts cause mortgage rates to fall? Many assume so, but when we compare the historical relationship between the fed funds, US 10-year Treasury, and mortgage rates, the math suggests that mortgages could stay over 6%. Get more in the latest edition of #AbovetheNoise. inves.co/3Y9U0Ze

Has the catalyst for stock diversification arrived? For investors looking to diversify their mega-cap technology exposure, improved growth and lower interest rates may be good reasons. Here are the key takeaways from our weekly market commentary. • Case for diversification: We’re not suggesting the AI trade is over, but we believe the environment is conducive to diversifying within the US markets. • Looking for catalysts: For months, there hasn’t been a catalyst to spark investors to consider diversifying within the US stock market. • Times may be changing: Improved growth and Federal Reserve (Fed) easing could be meaningful developments for investors waiting for a reason to diversify. Read the complete weekly market commentary. inves.co/4qel4m0

Happy holidays from Invesco! May this holiday season bring comfort and joy to you and yours as we look forward to rethinking what's possible together in 2026.

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Our framework suggests improving growth. In December, we’re overweighting stocks with a tilt toward value and small-and mid-caps. ⏰ Get our timely investment ideas, allocation guidance, and tips to help optimize your portfolios in our monthly playbook: inves.co/4puwOR6