I'm Kasey McCurdy, Chief Portfolio Strategist for Schwab Wealth Advisory, and this is your two minutes on the market with Schwab Market Insights. As we look ahead, I'll cover what we know, what we favor and what could change our mind.

First, what we know.

[Chart 1: Central-bank hikes versus cuts]
We're seeing a shift in global monetary policy. More recently, persistent inflation, resilient growth and geopolitical pressures have led some central banks to pause easing, while others, including the Federal Reserve, have begun raising rates.

[Chart 2: S&P 500 and market breadth]
Despite the tighter posture, market performance has been resilient, but participation beneath the surface has narrowed. The S&P 500 remains near its all-time highs, while fewer stocks are trading above their 200-day moving average. That narrowing participation suggests index performance is increasingly dependent on a smaller group of stocks, which may leave the market more vulnerable if earnings or economic growth disappoint.

[Chart 3: Global 10-year yields]

You can see the same reset in global bond markets. Government yields have risen across the United States, Japan, Canada and much of Europe. Investors around the world are adjusting their expectations to persistent inflation, resilient growth and fewer expected rate cuts.

So, what do we favor?

We remain neutral on equities. Strong earnings and AI-related investments offer support, but valuations, concentration and high expectations leave less room for disappointment.
Within fixed income, attractive yields support corporate credit, preferred securities and municipal bonds, although credit and interest-rate risks still remain. We favor duration below the Bloomberg Aggregate Bond Index, emphasizing short- and intermediate-term bonds.

What could change our mind?

Clearer progress on inflation and broader equity participation would improve the outlook. Renewed inflation, further policy tightening or a sharper decline in market breadth would call for greater caution.

These views may change, but investing principles remain important. Maintaining an appropriate long-term allocation, diversifying and keeping the portfolio aligned with a financial plan can help investors navigate changing market conditions. That's your two minutes on the market. We'll see you next month.