Market View: Fall, 2026

By Argent Wealth Management, LLC on September 22, 2026

Executive Summary

• Economic growth remains resilient.
• The Fed is likely to remain restrictive, reducing the monetary policy support that has helped drive strong equity returns in recent years.
• AI-driven optimism continues to fuel earnings expectations, but elevated growth assumptions and heavy reliance on tech spending increase the risk of disappointment.
• Investor optimism is elevated with average equity allocations at 56.4%, a level that has historically been associated with below-average long-term returns.
• Investors should moderate return expectations and emphasize diversification, as future equity returns may be lower than the post-2009 bull market, making bonds, commodities, and risk-managed strategies increasingly attractive.

Recession risks appear limited for now, as the labor market remains healthy, with job openings still exceeding the number of unemployed workers, a sign of ongoing economic resilience.

Inflation is trending higher, and persistent price pressures continue to present a challenge for policymakers and investors alike.

The NDR inflation timing model is 22 indicators that measure the various rates of change of commodities, consumer prices, producer prices, and industrial production.

With the economy in solid shape and inflation pressures building, the Federal Reserve is likely to maintain a tightening bias. Investors were assigning a high probability that the Fed would tighten policy at its upcoming September 16th meeting, underscoring expectations that inflation remains the central focus of monetary policy.

The Fed tailwind helping to boost stock returns over the last three years is gone.

The average investor equity allocation is 56.4%. Historically the rolling average return is negative over the next 10 years when the allocation is above 50%.

Historically, the market has experienced only a few rolling 10-year periods with negative total returns, and those episodes generally began with extreme valuation bubbles and ended amid severe economic downturns.

There does not appear to be a broad market bubble comparable to the late-1990s dot-com era. Unlike that period, many of today’s largest companies are highly profitable businesses with substantial earnings, cash flow, and established competitive positions. Investor enthusiasm surrounding artificial intelligence is significant, but it is balanced by a healthy degree of skepticism regarding the ultimate size, timing, and durability of the opportunity.

That said, bubbles do not have to encompass the entire market. Certain segments, particularly those most directly tied to AI infrastructure, semiconductors, and data center spending, may exhibit characteristics of speculative excess. As a result, investors should distinguish between the overall market and specific pockets where expectations, valuations, or capital investment assumptions may prove difficult to sustain over time.

Earnings and AI

Earnings expectations have continued to increase this year.

Earnings growth expectations have become increasingly ambitious. Historically, when long-term earnings growth expectations have exceeded approximately 14.2%, subsequent S&P 500 returns have often been below average and, in some periods, negative. Today, expectations are approaching that threshold, suggesting investors should be mindful of the risk that future growth may fall short of what is already reflected in stock prices. When expectations become overly optimistic, even strong fundamental results can disappoint the market.

Much of this optimism is tied to the unprecedented capital spending plans of hyperscale technology companies, which are investing heavily in data center infrastructure to support the growing computational demands of artificial intelligence. These investments are expected to drive robust growth for semiconductor manufacturers, equipment suppliers, and a wide range of industrial and infrastructure companies participating in the AI ecosystem. However, if the ultimate demand for AI-related computing power proves less than currently anticipated, earnings expectations across these sectors may need to be revised downward, creating potential headwinds for equity markets.

With the market’s advance becoming increasingly dependent on continued spending by hyperscale technology companies, capital expenditure expectations are an important driver of investor sentiment. Any reduction in projected AI-related spending could pressure earnings expectations and represents a risk to monitor closely.

In addition, research from Ned Davis Research previously indicated that the semiconductor sector had entered technical bubble territory, reflecting exceptionally strong price momentum and investor enthusiasm.

At major semiconductor cycle peaks, the PHLX Semiconductor Index is often in a bubble.

Moreover, the trend looks negative, with the 50-day moving average of price declining below the 100-day moving average.

A PEG ratio (Price-to-Earnings divided by earnings growth) of 0.41 suggests the stock appears attractively valued relative to its expected growth rate. However, investors should be cautious when evaluating cyclical companies using forward earnings metrics, as valuations often appear lowest near the peak of the business cycle. At cyclical peaks, demand is strong, margins are elevated, and earnings may be temporarily inflated, leading investors to assign lower valuation multiples because they expect profitability to normalize or decline over time.

What Does this Imply for Investors?

With recession risks appearing relatively low, a market decline of more than 20% to 25%seems unlikely absent an unexpected economic shock. But pockets of speculative excess remain, particularly in areas tied to artificial intelligence, where growth expectations are exceptionally high. As a result, investors should not be surprised by a 10% to 20%correction in the near term, especially if leadership stocks in the semiconductor sector experience a pullback. Such a decline would likely represent a normal market correction and, in our view, could create an attractive opportunity for long-term investors.

Looking further ahead, investors remain heavily allocated to equities following an exceptional bull market that has produced annualized returns of approximately 14.1%since March 2009. While current conditions do not appear consistent with a broad market bubble, elevated valuations and strong historical returns suggest future gains may be more modest. Investors should therefore calibrate expectations toward annual returns in the 0% to 10% range over the next decade, rather than assuming a continuation of the outsized returns experienced during the post-financial-crisis bull market.

While Federal Reserve tightening can place upward pressure on interest rates, a roughly 5% yield on 10-year U.S. Treasuries remains compelling if stocks are expected to deliver modest returns of 0% to 10% annually with higher volatility.

Unlike most asset classes, U.S. Treasury bonds have historically performed well during recessions, as investors generally view them as among the safest investments in the world and place a very low probability on a U.S. default.

However, federal debt continues to rise with no clear path to stabilization. As both stocks and bonds face elevated risks in the current environment, investors may benefit from diversifying beyond traditional asset classes. Strategies such as Buffer ETFs and covered call funds can complement a conventional stock and bond portfolio by offering the potential for participation in market gains while providing a degree of downside protection against both near-term volatility and longer-term market uncertainties.

A buffer ETF uses options to provide partial downside protection (a “buffer”) against market losses while giving up some upside potential over a defined period, usually one year.

A covered call strategy involves owning a stock (or portfolio) and selling call options on it to generate income, in exchange for giving up some or all the upside above a predetermined price. The income from selling the call partially offsets losses and lowers the volatility of the underlying stock (or portfolio).

Investors may also benefit from owning an allocation to commodities, particularly gold. Unlike fiat currencies, which can be created in unlimited quantities by governments and central banks, gold is a scarce asset with a limited supply, making it potentially attractive during periods of elevated inflation, currency debasement concerns, or growing government debt burdens.

The current commodity bull market is 6.4 years old, but historically commodity bull markets last for close to 16 years on average.

Source: Fig. 1: Ned Davis Research, Inc. © 2026 on 9/14/2026

Source: Fig. 2: Ned Davis Research, Inc. © 2026 on 9/14/2026

Source: Fig. 3: Factset, Argent Wealth Management, LLC © 2026 on 9/14/2026

Source: Fig. 4: Factset, Argent Wealth Management, LLC © 2026 on 9/14/2026

Source: Fig. 5: Ned Davis Research, Inc. © 2026 on 9/14/2026

Source: Fig. 6: Ned Davis Research, Inc. © 2026 on 9/14/2026

Source: Fig. 7: Ned Davis Research, Inc. © 2026 on 9/14/2026

Source: Fig. 8: Ned Davis Research, Inc. © 2026 on 9/14/2026

Source: Fig. 9: Factset, Argent Wealth Management, LLC © 2026 on 9/14/2026

Source: Fig. 10: Ned Davis Research, Inc. © 2026 on 9/14/2026

Source: Fig. 11: Factset, Argent Wealth Management, LLC © 2026 on 9/14/2026

Source: Fig. 12: Ned Davis Research, Inc. © 2026 on 9/14/2026