It Makes No Sense…Or Does It? 

Six Things You Should Know

1. Equity Markets –  were up this week with U.S. stocks (S&P 500) climbing +1.27% while international stocks (EAFE) gained +0.56%.
2. Fixed Income Markets – were down this week with investment grade bonds (AGG) declining -0.88% and high yield bonds (JNK) losing -0.99%.
3. Yield Volatility – Treasury yields eased early in the week as oil prices retreated, but reversed sharply higher, with the 10-year yield climbing from roughly 4.96% on Tuesday to 5.18% on Thursday—its highest level since 2007. The increase reflected stronger-than-expected economic data, renewed oil-driven inflation concerns and hawkish Fed commentary that raised expectations for another rate hike.
4. Oil Eases – Oil prices fell sharply early this week, with Brent briefly slipping below $98 per barrel after approaching $110 last week, before rebounding above $100. The initial decline reflected improving Strait of Hormuz flows, progress toward restarting Saudi Arabia’s East-West pipeline and hopes for U.S.–Iran diplomacy, while persistent conflict and supply-disruption risks kept prices volatile.
5. Cybersecurity Reminder – Scammers are increasingly using Remote Access Tools (RATs) along with phishing emails or texts to take control of devices like phones, tablets, and computers. Once installed, these tools can give cybercriminals access to sensitive information, including your Schwab accounts. These attacks can be hard to spot, so if something doesn’t feel right- like unusual account activity or suspicious messages- trust your instincts. If you sense suspicious activity, please call us immediately or report any concerns to Schwab at 800-515-2157. 
6. Key Insight – [VIDEO & ARTICLE] Investors often feel, and express, that the “market makes no sense” and that certainly has been the case this year where “bearishness” has been pervasive despite the strong market returns year-to-date. This week we walk through some of what drives that sentiment, but also what ultimately drives markets higher. 

Insights for Investors

By Tim Mitrovich

It Makes No Sense…Or Does It? 

Intro 

It Makes No Sense! A refrain often heard when it comes to markets from both retail investors and so-called professional analysts.  

And while such a statement may fit from time to time, the ubiquitousness of it on a near constant bias belies the fact that many people have a biased framework/agenda (even if subconsciously) that they are trying to fit the markets into. 

This reality is reflected by the “counter-statements” that have become market adages such as “the market can stay irrational longer than most investors can stay solvent” and “the market will do whatever will hurt the most people” (e.g. it tends to surprise the consensus/crowd). 

The “makes no sense” crowd has certainly been out in force this week, with the market posting some notable gains in the days following the Fed’s interest rate hike. After the Fed’s announcement to hike last week, the market initially dropped to around 7,530 on the S&P 500 only to stage a multi-day rally up to 7,777 by close Tuesday of this week – the same day the NASDAQ hit an all-time high. 

Consensus would not have predicted that, but as we cautioned you last week, (a) markets have generally proven resilient to measured hikes, and (b) market movements are more about relative expectations than absolutes – and when it comes to expectations, things had become quite dire. 

This week’s commentary will take a look at some key points that hopefully will help you make sense of this “makes no sense” market. 

Fade the Crowd 

I shared the old market adage above that “the market will do whatever will hurt the most people” (e.g. it tends to surprise the consensus/crowd). Momentum and the crowd are such powerful forces when it comes to investing given their power over our emotions. They are why investors rush to buy into the “hot stocks” or sell into “bear markets” only to regret it with a little bit of time and hindsight. 

It’s natural to believe there is safety in the crowd, likely some primal impulse we all have, but when it comes to investing is often the exact opposite … a real danger. 

This is why you will often find me encouraging you in the midst of bear markets (see here 4/3/25 during the Tariff Tantrum sell-off) to “fade” the crowd and take confidence from the general lack of it found by other investors. 

And this truth, coupled with the other market reality that market movements can be explained (and perhaps to a degree predicted) based on relative expectations is why continually evaluating investor sentiment and general market expectations can be so helpful – especially when markets are scary or seem to make no sense. 

So where are those expectations now? 

As you can see from the chart below, investor sentiment has been bleak most of the year despite the double-digit returns for most major equity indices. Investors look to headlines around the war, inflation, the Fed, and general political turmoil––all of which is far more compelling than the stable jobs data, continued earnings growth, and improving manufacturing data we’ve seen roll in over 2026 that are the real drivers of the market over time.

This most recent reading sees “bears” outnumber “bulls” by over 20%, a two-year low, but this is likely good news for investors willing to be a bit more patient and embrace more intermediate timeframe. (Source: Fundstrat, 9/17/26)  

But, but what about?! 

Many people, especially the media and doomsayers with paid podcasts, radio shows or newsletters love to warn you about everything that can wrong. What they don’t tell you is that there are always reasons to be concerned (see our piece from 5/5/26 Lessons from the Ring) but what’s also true is the economy’s/market’s history of overcoming those challenges.  

Also, true is people’s misuse of the adage “what goes up, must come down” to markets. Their subconscious application assumes far more downside potential than history would support and/or the belief it goes exactly back to some “zero point” from years ago. The market of course has its periods of volatility, which absolutely should be expected and planned for, but its general direction over time has been higher despite any scary headlines, as the following graph shows. 

I also think that current investors still have the haunting memories of 1999 and 2008 in mind and, consequently, oversimplify that markets must plummet after a good run. History again would suggest something a bit different. As Ben Carlson pointed out recently, all-time highs tend to cluster, meaning another new high is more likely than the onset of a nasty bear market – this is especially true when markets are climbing the proverbial wall of worry (a.k.a. low investor expectations).  

He also notes all the worries that investors have had to endure if they participated in the last five years of strength, noting: 

“To reach new highs again and again in the 2020s investors have had to ignore: 

• A global pandemic. 

• The fastest 30%+ drawdown in history. 

• A supply chain crisis. 

• Meme stock mania. 

• A 40-year high inflation rate of 9%. 

• Russia invading Ukraine. 

• $140/barrel oil prices. 

• The Fed hiking rates 75 basis points in back-to-back meetings. 

• Short-term bond yields go from 0% to 5%. 

• An inverted yield curve. 

• Silicon Valley Bank crisis. 

• The 2022 bear market. 

• The worst bond market crash in history. 

• One of the worst years ever for a 60/40 portfolio. 

• Mortgage rates go from 3% to 8%. 

• Everyone predicting a commercial real estate crisis. 

• Evergrande/China real estate crisis. 

• Government shutdowns. 

• Debt ceiling stand-offs. 

• U.S. credit rating downgrade. 

• The Yen carry-trade unwind. 

• Liberation Day tariffs. 

• The Iran War. 

• Oil/gas prices spike (again). 

• 30-year Treasury yields move to the highest levels since 2007. 

• Recession predictions every single year. 

• Stagflation fears. 

• 73 crash predictions from Robert Kiyosaki. 

• 19 Michael Burry top calls. 

• 10 straight years of worrying about stock market concentration.” 

Source: A Wealth of Common Sense, 8/9/26 

It’s the Economy … 

People may not want to believe it whether because of their preconceived notions about what markets should do, all the troubles dominating headlines, or their political sensibilities in an election year but the economy is actually doing well and that coupled with corporate earnings is why the markets seem to be defying common logic. 

Torsten Slok, Chief Economist of Apollo, spoke of this strength and his conviction in it continuing in a piece entitled Why Higher Rates are Slowing the Economy Less than in Past Cycles stating, “When the Fed began hiking in 2022, traditional rate-sensitive sectors, including office construction, rolled over quickly … But data center construction continued to surge as investors and hyperscalers judged that AI-driven returns would exceed the higher cost of capital. High expected returns and strategic capacity needs have made AI spending largely indifferent to higher interest rates, blunting one of the main channels through which tightening normally slows activity. Combined with the growth impulse from the One Big Beautiful Bill, the industrial renaissance and prospective tariff refunds, all largely rate-insensitive, we expect growth to remain firm.” (Source: Apollo, 8/20/26, emphasis his) 

Don Rissiller of Strategas while acknowledging the potential for a slowdown, especially if the Fed hikes a few times, similar expressed overall confidence in the current economic cycle forecasting that while “the U.S. economy looks set up for a slowdown. Some rate sensitive sectors (e.g., housing) are already weak. But with the labor market stable (even if it is low hire/low fire), tech investment still booming, and corporate profits expanding, it is difficult to flip our call to an overall economic contraction. So, our base case is that the U.S. economy is headed for a mid-cycle slowdown, but not a recession.” (Source: Strategas, 9/21/26). 

To these respected commentators we add that for all the ink spilled around the state of Treasury rates, more importantly, credit spreads (which are solid indicators of underlying stress within the system) are still stable. Ryan Grabinski summarized it this way saying “Looking at the breakdown of credit spreads by rating quality, spreads have been largely unchanged for the year across nearly all ratings, with AAA through B moving within roughly ±15 bps. CCC is the notable exception, with spreads widening by nearly 300 bps. On its own, this isn’t necessarily a concern, given that CCC represents a relatively small cohort.” (Source: Strategas, 9/15/26) 

Lastly, while economic indicators are important, the market ultimately is driven by earnings. As we’ve been highlighting throughout the year, those earnings continue to be solid, and that reality is where investors should be keeping their focus as opposed to the list of headline events noted by Ben Carlson above.  

Consider the following Key Metrics from their most recent Earnings Insights from September 18^th (Source: https://www.factset.com/earningsinsight): 

• Estimated Q3 2026 earnings growth of 28.6%, which would potentially be the third straight quarter above 25%. 

• Analysts have raised their Q3 estimates since June, unusual because estimates typically fall during a quarter. 

• All 11 sectors of the S&P 500 are expected to report year-over-year earnings growth 

• Solid expected continued growth of 26.5% in Q4 of 2026 and 15.2% for full year 2027. 
   

Perhaps no single graph refutes the “market doesn’t make sense” argument more than the one below, which shows the change in earnings vs. the change in market price. As you can see, the market’s growth has followed earnings growth almost exactly. 

As a result, far from the disconnects seen in 1999’s tech bubble that so many like to trot out as a comparison/warning, today’s market trades at reasonable valuation that’s somewhat shockingly at the same levels seen during the COVID lows and 2022 lows, as opposed to the 1999 highs. (See accompanying chart)

In Closing 

We all have various feelings, sensibilities, wishes, biases, etc., which is perfectly normal. However, left unchecked, unchallenged, or misapplied those natural feelings can become nefarious foes – and that is often the case when it comes to investing. 

When you listen to your feelings, the crowd, and the media vying for your time and attention for their own profit, you put at risk missing the real picture and in so doing, your own ability to profit from your hard-earned savings. 

Yes, the world is full of challenges. That has, and always will be the case, but the world is also full of resilient and innovative people ready to overcome those challenges. 

That truth is worth remembering and taking heart in. 

I hope this commentary has helped reframe some things for you, and as always, we are here to walk alongside you and those you care about on this journey. 

Have a great weekend, 

Tim and the team at TEN Capital 

Data, Just the Data

• Euro Area Composite PMI – the flash reading for September rose to 53.1 for the third consecutive month of expansion. This also marks the fastest pace of growth for the region in 3 and half years.
• U.S. Durable Goods Orders – remained flat in August despite expectations for a 0.4% decline. Orders for non-defense capital goods excluding aircraft (a closely watched gauge for future business spending) rose 1.6%
• U.S. New Home Sales – spiked 6.4% in August to a seasonally adjusted annualized rate of 684,000. This marks the highest level of sales on the year so far.
• U.S. Jobless Claims – initial claims for the previous week came in at 197,000 and still hovering near 50-year lows. Continuing claims only rose by 2,000 to 1,719,000, also remaining near 3-year lows.