Monthly Outlook: September 2026
My, how time flies when you’re having fun. This month marks our 25th anniversary, which means this is our 300th Monthly Outlook. It’s been a wonderful journey and we’re so grateful to the many clients that have entrusted us and to the friends, business partners, and family members who have supported us along the way.
We’ve seen a lot since we started the firm in 2001: the internet bubble and bust of 2001–2002; the Great Financial Crisis of 2008; COVID; four US Presidents and five Federal Reserve Chairs; wars in Afghanistan, Iraq, and Iran; and now perhaps a new AI bubble in the making. Against all that, we’ve also seen some fantastic market rallies and growth. Although it took until 2013 for the S&P500 to get back to the level it was in 2001 when we started the firm, it has been almost a straight line higher for the past 13 years. Today, the S&P500 is 400% higher than it was when we started the firm 25 years ago, but it sure took an erratic path to get there!
As we pause briefly to celebrate a milestone, we’re even more excited for the next 25 years. We started the firm to combine knowledge & experience, integrity & ethics, and service & care. We’ve been building our team, our systems and procedures, and discipline and consistency in our iFolios portfolio management. It’s all come together in the past five years or so and we are really proud of the firm that we have become and what we can do to help our clients for decades to come.
Global Stocks at All-time Highs: Valuations at All-time Highs, too
As we embark on our next 25 years, global stocks are at all-time highs. Stocks have rallied for most of the past four years, which can cause many investors to forget what a drawdown or correction feels like. COVID absolutely devastated the global economy for a few years starting in 2020, but stocks only dipped for about four months. The post-COVID stimulus was slow to stimulate the actual economy but sent stocks soaring higher through 2021 until the reality of the inflation that it created set in. By early 2022, fully two years after the start of COVID, and after two years of massive stimulus, inflation had risen to an unacceptable 9%. In March 2022, the Fed finally tried to rein in inflation and raised Fed Funds steadily from 0% to 5.5% in one years’ time, sending stocks down 25% during the year. But that 25% drawdown was quickly forgotten as the new AI buildout started in 2023. Stocks have rallied ever since, except for a few months in 2025 due to the start of Trump’s tariffs, and for a few months in early 2026 due to the start of the Iran war. Investors are euphoric about the potential of AI and the massive investments in technology. Nothing yet seems to dissuade investors from jumping off the stock market train.
Not to be the bummer at the party, but we need to remind investors that stocks are now trading at 100-year peak valuations as a result of the recent AI enthusiasm. Margin debt is also at peak levels, sometimes a sign of a market top. Admittedly, valuations have been at peak levels for a couple of years now and it hasn’t mattered. Whether we look at valuation metrics like P/E, Market Cap to GDP, CAPE ratio, etc., they all confirm peak levels. These valuation levels have been correlated to very weak subsequent 10–12-year stock market returns, but don’t say anything about the year or two ahead or how the volatility over the next 10–12 years might unfold. The next decade might result in overall sub-par stock market returns, but that doesn’t mean there won’t be some great tradeable booms and busts along the way. In fact, we’d expect that and look forward to it.
No Need to Predict, Just Prepare
As we said earlier, we’ve seen a lot of market volatility over our firm’s first 25 years. And we expect more of the same over the next 25 years and beyond. That’s just how the economy and markets work. We also know that no one is able to predict either with any consistency. Instead, we are always using our knowledge & experience to contemplate the possibilities, and are prepared for any outcome. As fiduciaries, we have the integrity & ethics to do whatever is in our clients’ best interest, balancing dual goals of growth with protection. And we have a culture of service & care to make sure we do it all in a friendly and professional manner. Life is an active endeavor and requires changes as changes occur. Wealth management is no different, and we’re ready to guide you intelligently, and with care.