Asbury Wealth Partners

10/19/2026

Observations & Insights – October 19, 2026

Tech Sell-Off
Technology stocks sold off sharply last week, sending the NASDAQ down 4.5% and leaving it 5.3% below its October 6 record high. The S&P 500 fell 1.9%, while the Dow finished slightly higher.

Key Points
• Concerns about AI infrastructure spending triggered a sharp sell-off in technology stocks, even as other sectors demonstrated relative strength.
• Inflation remains stubbornly elevated, complicating the Federal Reserve's outlook and keeping investors focused on Treasury yields.
• Corporate earnings continue to grow at an impressive pace, although high expectations leave little room for disappointment.
• Weakness beneath the major indexes may be creating opportunities that headline index returns obscure.
• The market has been consolidating near its highs since August, making patience and selectivity especially important.

Observations: Growth Stocks Stall as Earnings Season Kicks Off
Source: John Hancock Investments, “Weekly Market Recap,” October 16, 2026

A rotation away from AI-related stocks and chipmakers weighed on U.S. large-cap growth stocks, while relative strength in healthcare and traditionally defensive sectors lifted the value equity style. A growth benchmark finished the week down 5.0%, while its value counterpart climbed 0.9%.

The decline in oil prices seen since mid-September reversed course, with U.S. crude rising more than 8% for the week and moving back above $100 per barrel on Friday. The shift came amid uncertainty over Middle East supplies and a larger-than-expected withdrawal from U.S. crude stockpiles. Even with the latest price rise, U.S. crude remained below a recent high of nearly $106 set on September 15.

Overall earnings expectations were modestly scaled back after mixed results came in from the major U.S. banks that opened earnings season. As of Friday, analysts projected that third-quarter earnings for companies in the S&P 500 rose 29.0%, down from a forecast of 29.4% a week earlier, according to FactSet. Such an outcome would mark the third consecutive quarter of earnings growth exceeding 25%.

Yields on longer-dated U.S. Treasury securities fell for the second week in a row, with the 10-year Treasury yield ending the week at 5.08%, down from 5.24% the previous week. The 30-year yield fell to 5.43% from 5.60%. Shorter-term yields declined more modestly, with the 2-year Treasury yield at 4.72%, versus 4.79% the prior week.

Two reports reflected persistently elevated inflation at the consumer and wholesale levels, with costs rising beyond energy prices. Wednesday’s Consumer Price Index report showed a 3.7% annual rate in September, up from 3.4% the previous month. A separate Thursday report on producer prices showed wholesale inflation rose in September at a 6.3% annual rate, the highest since 2022.

U.S. retailers reported a bigger-than-expected gain, with sales up 0.8% in September versus economists’ consensus estimate of 0.3%. However, excluding gasoline, retail sales rose just 0.2%, suggesting that higher fuel prices accounted for much of the headline increase.

A South Korean stock benchmark dropped more than 14%, with the weekly sell-off driven largely by declines in the shares of the nation’s chipmakers and AI-related stocks. As of Friday, the index had fallen almost 38% since June, when it reached a record high.

In the week ahead, investors will focus on the next round of third-quarter earnings reports and management guidance, especially commentary on capital spending, demand and profit margins. Economic releases and movements in Treasury yields and energy prices will also remain important drivers of market sentiment.

Insights: Market Turbulence — Risk or Opportunity?
Last week’s sell-off showed that even a bull market can experience substantial turbulence. Technology shares, among the market’s strongest performers this year, fell as investors questioned valuations and the scale of AI infrastructure spending.

The divergence between major indexes and their individual stocks is striking. Although the S&P 500 remains near its highs, many companies have suffered substantial corrections, revealing risks and opportunities that headline returns can obscure.

A Bull Market Hiding a Bear Market?
Because the S&P 500 is weighted by market capitalization, its largest companies drive a disproportionate share of index returns. Their strength can conceal weakness elsewhere.

Market breadth has been uneven, with fewer stocks participating consistently in the advance. That does not necessarily signal an imminent bear market, but it suggests greater investor selectivity.


Source: Macro Micro

Some stocks have declined because earnings prospects weakened; others have become less expensive despite healthy fundamentals. We believe the latter may offer opportunities as conditions stabilize.

Interest Rates and the Bond Market Hold the Key
We expect technology and other high-growth stocks to remain especially sensitive to interest rates.

When Treasury yields rise, bonds become more competitive with stocks, and investors generally become less willing to pay higher multiples for future corporate earnings. This is particularly important for technology companies whose valuations depend heavily on expectations for earnings growth years into the future.

Even small changes in Treasury yields can produce outsized moves in technology shares and, given their index weightings, the broader market.

Treasury yields fell last week even as technology shares sold off, underscoring that rates are only one influence. AI spending concerns, high expectations and questions about future profitability can outweigh the benefit of lower yields. Still, bond-market movements and expectations for Federal Reserve policy will remain important drivers of valuations.

The latest inflation reports complicate the outlook. Consumer inflation accelerated in September, while producer prices indicated that businesses continue to face significant cost pressures. Much of the recent inflation has been influenced by energy prices and supply-related disruptions, factors that higher interest rates cannot directly resolve.

We remain concerned that the Federal Reserve could unnecessarily weaken economic growth by responding too aggressively to inflation driven partly by supply constraints. Our expectation is that inflation and interest rates will eventually stabilize, although the path may be uneven and take longer than anticipated.

Corporate Earnings Remain Encouraging
Corporate earnings remain an important foundation for our longer-term optimism.

FactSet’s October 16 update projected third-quarter S&P 500 earnings growth of approximately 29%. Of the 9% of companies reporting, 84% beat earnings estimates, although the average surprise was smaller than historical norms. Encouragingly, earnings estimates have also improved beyond the largest technology companies.

First Trust’s October 16 Equity Newsletter highlights two encouraging trends. The S&P 500 forward price-to-earnings (P/E) ratio has fallen to 18.91 times estimated earnings, although it remains above the chart’s long-term average of 17.25 times. Meanwhile, analysts have raised aggregate 2027 earnings estimates since December 2025 for the S&P 500 (+18.2%), S&P Midcap 400 (+6.1%) and S&P SmallCap 600 (+12.0%).



Together, the charts show how rising earnings estimates and a declining P/E multiple can make valuations more attractive, even when index prices remain elevated. The market is not necessarily cheap, but improving earnings prospects may create opportunities across company sizes.

These valuations depend on forecasts, not guaranteed earnings. Estimates could fall if growth slows, margins weaken or companies scale back investment.

High Expectations Create Vulnerability
We believe AI will deliver substantial productivity gains, but not every company funding or building the infrastructure will earn attractive returns.

The scale of spending raises questions about financing, profitability and how quickly investments will pay off. Some businesses may justify their valuations; others may not.

As the AI investment cycle matures, investors may place more weight on demonstrated earnings and cash flow than on projected growth.

Patience and Opportunity
We believe stocks have been consolidating near their highs since August. The major indexes have traded in a range as investors weigh strong earnings against elevated rates, persistent inflation and demanding valuations. Last week’s technology sell-off appears to be another episode in that process, rather than necessarily the start of a new phase.

We see this consolidation as potentially constructive. It gives earnings time to catch up with valuations, as First Trust’s charts illustrate. Further downside is possible, but a major index decline is not required for valuations to improve.

Over time, stabilizing inflation and interest rates could improve confidence and support higher valuation multiples, even if earnings growth moderates. Persistent inflation or recession would challenge that outlook.

For now, patience is more appropriate than pessimism. The market has been working through these pressures for months, and the next sustained advance may take time. We remain constructive over the longer term and intend to stay disciplined, selective and opportunistic.

Financial Planning: Trump Accounts
Sources: Internal Revenue Service, “Working Families Tax Cuts” and “Instructions for Form 4547” (December 2025); Invest America, “Dell $250 Contribution FAQ” (updated October 9, 2026).

We have received many questions about Trump Accounts and how they might fit into a family's financial planning. These new tax-advantaged investment accounts are designed to help children begin building long-term savings. Eligible U.S. citizen children born between 2025 and 2028 may receive a one-time $1,000 federal contribution, while certain children born between 2016 and 2024 may qualify for a separate $250 contribution funded by Michael and Susan Dell. Families and other eligible contributors may contribute up to a combined $5,000 annually per child in 2026, including qualifying employer contributions of up to $2,500. Investment earnings grow tax-deferred, with funds invested in eligible low-cost U.S. stock index funds.

Beginning in the calendar year the beneficiary turns 18, traditional IRA rules generally apply, potentially creating opportunities for Roth IRA conversions when the beneficiary is in a lower tax bracket. However, conversions may generate taxable income, and early distributions may be subject to additional taxes. Trump Accounts should be evaluated alongside 529 college savings plans and other strategies, as their tax treatment and withdrawal rules differ. We believe they are worth considering, particularly when government or employer contributions are available.

It is our aim at Asbury Wealth Partners that you find the market commentary we provide informative and useful. As our success grows mainly through referrals from our clients, we encourage you to share this weekly newsletter with your friends, family, and colleagues. If you are a client, we thank you for your business and your confidence. If you are not yet a client, we encourage you to contact us today and explore how our team may be able to add value to your unique financial situation.

Thank you,

Paul O'Hara, CFP®
[email protected]

10/12/2026

Observations & Insights – October 12, 2026

All-Time Highs
A strong start to the week lifted the S&P 500 and the NASDAQ to record highs on Tuesday. Neither index extended its record as the week progressed, but both finished around 1% higher overall, as did the Dow.

Key Points
• Stocks reached new all-time highs as the bull market approaches its fourth anniversary.
• Third-quarter earnings season kicks off this week with major banks reporting, providing an important test of corporate earnings growth and elevated market expectations.
• Attractive bond yields offer investors a compelling alternative to stocks, putting additional pressure on equity valuations.
• Political uncertainty, higher interest rates and inflation could trigger a correction, but pullbacks are a normal part of bull markets.
• We believe AI-driven productivity gains could extend the earnings cycle, while moderating inflation and interest rates could provide another catalyst for higher stock prices eventually.

Observations: Earnings Season on Deck
In the wake of recent bond market volatility, yields of 10-year and 30-year U.S. Treasuries were slightly lower overall for the week but remained near their highest levels in more than two decades. At Friday's close, the 10-year yield was 5.24%; the 30-year was 5.60%. The 2-year Treasury fell to 4.79%, down from 4.84% the previous week.

Wall Street analysts maintained high expectations as major U.S. banks prepared to open quarterly earnings season. As of Friday, analysts surveyed by FactSet were forecasting an average third-quarter earnings growth rate of 29.6% for companies in the S&P 500. Such an outcome would mark the third consecutive quarter of earnings growth exceeding 25%.

Oil traded in a relatively narrow range for the second week in a row, in a marked shift from the price volatility seen since Middle East tensions escalated in March and April. On Friday afternoon, U.S. crude was trading around $91.50 per barrel, up fractionally from its price a week earlier. As recently as mid-September, oil was trading as high as $105; in early April, it traded as high as $115.

Wednesday’s release of minutes from the latest U.S. Federal Reserve meeting showed that policymakers anticipate possibly raising interest rates again before year end. However, it was unclear how soon such a raise might come. At its meeting in mid-September, the Fed raised its benchmark rate for the first time since 2023. Its next policy meeting ends on October 28.

A monthly gauge of U.S. consumer sentiment fell to the lowest level in five months amid persistent worries about inflation. The University of Michigan reported on Friday that its Index of Consumer Sentiment fell to a preliminary October reading of 46.3, down from a final September reading of 48.1 and 51.7 in August. Despite the decline, sentiment remains above the record low of 44.8 set in May 2026.

A U.S. small-cap stock benchmark underperformed for the week, extending a recent run of lagging results for the Russell 2000 Index amid concerns about elevated interest rates. At Friday’s close, the Russell 2000 was down a cumulative 5.7% over the past five weeks, versus a 1.0% gain over that period for a U.S. large-cap index.

A Consumer Price Index report scheduled for release on Wednesday will provide a major data point for the U.S. Federal Reserve ahead of its policy meeting late this month. The most recent CPI report released in September showed inflation at a 3.4% annual rate in August, unchanged from the previous month and still well above the Fed’s 2.0% target.
Source: John Hancock Investments, “Weekly Market Recap,” October 9, 2026

Insights: Is This Bull Market Stronger Than Investors Think?
The stock market continues to surprise investors. Despite stubborn inflation, higher interest rates, geopolitical uncertainty and concerns about government borrowing, stocks have continued reaching new highs. The current bull market turns four years old this month, and investors are understandably questioning how much longer it can continue.

We have remained constructive on stocks, largely because corporate earnings have continued growing despite a challenging economic environment. However, I believe the more interesting question is whether investors are underestimating how much further earnings can grow, particularly as artificial intelligence and other technological advances begin delivering productivity improvements throughout the economy.

Four Years into the Bull Market
Bull markets do not come with expiration dates. The S&P 500 has gained approximately 120% since its October 2022 low. Although that is an impressive advance, history suggests that bull markets can continue well beyond their fourth anniversary.



The chart above puts the current bull market into historical perspective. While its age may make investors uncomfortable, four years is not necessarily a reason to expect the advance to end. More often, bull markets encounter trouble when economic growth deteriorates, corporate earnings weaken or financial conditions become sufficiently restrictive to undermine business activity.

Are We in an Earnings Bubble?
In a recent discussion on The Compound and Friends podcast, Fidelity's Jurrien Timmer raised an interesting question about whether investors may be experiencing an earnings bubble rather than a traditional valuation bubble. The concern is not simply that stock prices have risen too far, but that investors may be extrapolating unusually strong corporate earnings growth too far into the future.

That is a legitimate concern, particularly given the enormous investment in artificial intelligence. Eventually, companies will need to demonstrate that this spending produces an adequate return. However, I believe this earnings cycle may last longer than investors anticipate.

The initial phase of AI investment has primarily benefited semiconductor manufacturers, cloud computing providers and other infrastructure suppliers. The next phase could be much broader, as businesses throughout the economy begin using these technologies to reduce costs, improve efficiency and increase productivity.

If those benefits materialize, manufacturers, healthcare providers, financial institutions, retailers and service companies could all experience improved profitability. In my view, the longer-term opportunity is not limited to the companies building AI infrastructure but extends to the businesses that eventually put that technology to work.

Stocks Are Becoming Less Expensive
One of the most interesting developments in this bull market is that stock prices have continued rising while valuation multiples have declined. Normally, investors associate higher stock prices with more expensive valuations. However, that is not necessarily true when corporate earnings are growing faster than stock prices.

According to Carson Research, the S&P 500's forward price-to-earnings multiple declined from 22.2 at the end of 2025 to approximately 19.4 in early October. Meanwhile, forward earnings expectations increased substantially. Investors are effectively paying less for each dollar of expected corporate earnings, even though stock prices have risen.



The chart above illustrates how earnings growth has more than offset the downward pressure on valuations from higher interest rates. This is encouraging because it suggests that the market's advance has been supported by improving corporate fundamentals rather than simply investors becoming willing to pay increasingly expensive multiples.

That does not mean stocks are cheap. Valuations remain relatively elevated, and forward earnings estimates are expectations rather than guarantees. Nevertheless, the market has become less expensive relative to its anticipated earnings, despite reaching new highs.

Stocks Have Competition Again
Another important consideration is that bonds are once again offering attractive yields. With the 10-year Treasury yielding approximately 5.2% and the 30-year around 5.6%, investors can earn meaningful income from high-quality fixed-income securities without assuming the same risks associated with stocks.

For investors in higher tax brackets, municipal bonds can also be compelling. Depending on the investor's tax situation, high-yield municipal bonds may offer attractive taxable-equivalent income, although they carry additional credit and liquidity risks compared with Treasuries.

This competition for investment dollars helps explain why stock valuations have contracted. When investors can earn attractive yields from bonds, they become less willing to pay elevated multiples for corporate earnings.

Corrections Are Normal
I would not be surprised to see another market correction as we approach the midterm elections. Political uncertainty, concerns about potential tax increases at the state and federal levels, and the possibility of additional interest-rate increases could all contribute to volatility.

However, corrections are a normal part of investing and do not necessarily signal the end of a bull market. They can help reduce excessive speculation, bring valuations into better balance and create opportunities for long-term investors.

The more important question is whether a correction reflects deteriorating economic fundamentals or simply changing investor expectations. As long as corporate earnings remain healthy and the economy continues growing, I would be reluctant to interpret every pullback as evidence that the bull market has run its course.

What Could Take Stocks Higher?
While earnings growth has been the primary driver of the market, there is another potential source of support that has been largely absent recently: expanding valuation multiples.

Higher interest rates have made investors less willing to pay elevated prices for future corporate earnings. However, that relationship can work in both directions. If inflation begins to moderate and Treasury yields stabilize or decline, investors may once again become willing to pay higher multiples for those earnings.

A resolution to the war involving Iran could also improve the outlook. Lower energy prices could ease inflationary pressures, provide relief to consumers and businesses, and give the Federal Reserve greater flexibility in setting monetary policy.

If corporate earnings continue growing while inflation moderates and interest rates stabilize, stocks could benefit from both higher profits and expanding valuations. That combination would provide a more favorable backdrop than the one investors have navigated recently.

Final Thoughts
Four years into this bull market, there are legitimate reasons for caution. Interest rates remain elevated, inflation has been persistent and investors are questioning whether extraordinary corporate earnings growth can continue. Political uncertainty surrounding the midterm elections could also contribute to another correction.

Nevertheless, I believe the longer-term earnings outlook remains stronger than many investors appreciate. The enormous investment in artificial intelligence is still in its early stages, and the productivity benefits are only beginning to reach the broader economy. As businesses find ways to produce more efficiently, control costs and improve profit margins, earnings growth could continue well beyond the current investment cycle.

Stocks have already demonstrated that they can advance despite higher interest rates and declining valuation multiples. If inflation moderates, bond yields stabilize and geopolitical tensions ease, the market could eventually benefit from both continued earnings growth and expanding valuations.
That is why we remain constructive on the longer-term outlook. Corrections are an inevitable part of investing, but I believe the earnings and productivity runway supporting this bull market may be considerably longer than investors currently expect.

It is our aim at Asbury Wealth Partners that you find the market commentary we provide informative and useful. As our success grows mainly through referrals from our clients, we encourage you to share this weekly newsletter with your friends, family, and colleagues. If you are a client, we thank you for your business and your confidence. If you are not yet a client, we encourage you to contact us today and explore how our team may be able to add value to your unique financial situation.

Thank you,

Paul O'Hara, CFP®
[email protected]

Send a message to learn more

09/28/2026

Observations & Insights – September 28, 2026

Stocks Push Higher Despite Rising Yields
Borrowing costs continued to climb last week as declining bond prices pushed Treasury yields to levels not seen in nearly two decades. At Friday’s close, the yield of the 10-year U.S. Treasury finished at 5.16%, up from 5.01% the previous week. The 30-year yield was 5.49%, and the 2-year yield was 4.85%.

Key Points
• Stocks continue to rise despite higher Treasury yields, increased bond volatility and continued geopolitical uncertainty.
• Large-cap technology and AI-related stocks have regained market leadership, potentially reflecting investors' preference for strong earnings, cash flow and balance sheets.
• Higher interest rates are compressing P/E multiples but rising corporate earnings have so far been strong enough to offset much of that pressure.
• Investor positioning remains cautious, creating the potential for additional buying if underinvested investors and professional managers are forced to chase a rising market.
• A melt-up is not inevitable, but strong earnings, renewed Big Tech leadership and widespread skepticism create conditions that could support further gains.

Observations: Big Tech Regains Leadership
The NASDAQ climbed to a record high on Tuesday, eclipsing a previous peak reached in early June, before pulling back modestly on Wednesday. By Friday’s close, the NASDAQ finished 2.1% higher for the week; the S&P 500 and Dow posted gains of 1.2% and 0.3%, respectively.

An apparent easing of tensions in the Middle East conflict sent oil prices lower, with U.S. crude down to roughly $92 per barrel on Friday afternoon. As recently as September 15, oil traded as high as $106; the year-to-date peak came in early April, at $113.

Recent bond market volatility has extended beyond U.S. borders, with government debt yields in major developed markets climbing to multi-year highs amid concerns about inflation and interest rates. On Friday, yields for 10-year government bonds reached 5.36% in the United Kingdom, 3.60% in Germany, and 3.07% in Japan. In contrast, China’s 10-year debt was yielding 1.69%, down slightly for the week and far below yields in most other major economies.

For the second week in a row, a U.S. large-cap growth stock benchmark outperformed its value-oriented peer by a wide margin, chipping away at the value style’s still-sizable year-to-date performance leadership. The growth index finished 2.4% higher for the week, while its value counterpart was essentially flat.

The U.S. dollar extended its recent gains in global currency markets following the first U.S. interest rate increase in three years. As of Friday afternoon, the dollar was up 0.6% for the week against a basket of major foreign currencies and 2.3% above a recent low on September 9.

Inflation worries and the Fed’s latest interest rate hike continued to weigh on the U.S. housing market, as the average 30-year U.S. fixed-rate mortgage rate eclipsed 7.00%. Freddie Mac on Thursday reported that the previous week’s average had reached 7.03%, the highest since January 2025; a subsequent daily survey by Mortgage News Daily found that the average had climbed further to around 7.45% as of Friday, reflecting a further surge since the Freddie Mac survey.

A monthly labor market report due out on Friday will show whether August’s improvement in labor market conditions extended into September. August’s report showed a monthly gain of 162,000 jobs—roughly triple the number that most economists had forecast in the wake of weak figures in the previous months. August’s unemployment rate held steady at 4.1%.

Insights: Has Big Tech Become the New Safety Trade?
Something unusual is happening in the financial markets. Treasury yields have risen to their highest levels in nearly two decades, the Fed has resumed raising interest rates and geopolitical uncertainty remains elevated. Normally, that combination would be expected to push investors toward traditional safe-haven assets and away from stocks.

Instead, stocks have remained remarkably resilient. The NASDAQ gained 2.1% last week and reached another record high, while large-cap growth again significantly outperformed value. At the same time, the bond market has become increasingly volatile as investors adjust to higher rates, persistent inflation and uncertainty over future Fed policy.

That raises an interesting question: Has Big Tech become something of a safety trade?

When Bonds Are Not So Stable
Treasury bonds have traditionally provided investors with income and diversification during periods of stock-market stress. They can still play that role, particularly if economic weakness causes interest rates to fall. But an inflation-driven, rising-rate environment creates a different dynamic. When rates rise, existing bond prices fall, and longer-maturity bonds can experience surprisingly large price swings.

That does not make Treasury bonds unsafe. Investors who hold an individual Treasury to maturity still receive the promised principal and interest. But it does remind us that safe and stable are not necessarily the same thing, particularly when interest rates are rising.


Source: Charles Schwab

The chart above shows the MOVE Index, which is essentially the bond market’s version of the VIX, the widely followed measure of stock-market volatility. It measures expected volatility in Treasury yields across several maturities. Notice how bond-market volatility began rising this summer even as volatility in the stock market was declining. That divergence is noteworthy. Investors traditionally think of stocks as the volatile part of a portfolio and Treasuries as the stabilizer, but lately much of the uncertainty has been coming from the bond market itself.

Perhaps that helps explain some of what we are seeing in stocks.

Why Big Tech?
Money appears to be rotating back toward large-cap technology and AI-related companies.

At first glance, calling Big Tech a safety trade sounds contradictory. Technology stocks have traditionally been associated with growth and higher valuations. But today's largest technology companies have characteristics investors often seek when uncertainty rises; enormous earnings, substantial free cash flow, strong balance sheets and dominant competitive positions.

They are also generally less dependent on outside financing than smaller companies. When the cost of capital rises, the ability to fund investment internally becomes increasingly valuable. In that sense, Big Tech may offer investors an unusual combination of AI-driven growth and financial quality.

This does not mean Big Tech has somehow become a substitute for Treasury bonds. The risks are obviously very different. But when investors are uncertain about interest rates and economic growth, it is not difficult to understand why capital might gravitate toward some of the largest and most profitable companies in the world.

Earnings Are Winning the Tug-of-War
This brings us back to the question we have been discussing for several weeks: Why are stocks doing so well when interest rates are moving higher?

A 10-year Treasury yielding more than 5% creates real competition for stocks. Higher risk-free rates also reduce the present value of future corporate earnings, which should put downward pressure on P/E multiples. And that is happening. What has prevented lower multiples from translating into a falling stock market is the other side of the equation: earnings continue to rise.



The chart above shows the relationship between the S&P 500, expected corporate earnings and the valuation investors are willing to pay for those earnings. The important point is the divergence between earnings and valuation. Forward earnings have continued to climb while the market's P/E multiple has contracted. In other words, higher interest rates are having the effect we would expect on valuations; they simply have not been powerful enough to overwhelm earnings growth.

That is the tug-of-war taking place beneath the market. Higher rates are pulling valuations lower while rising corporate profits are pulling stock prices higher. So far, earnings are winning.

Are Investors Off-Sides?
There may also be another source of potential demand: investors themselves.

Goldman Sachs recently highlighted an unusual disconnect between strong stock market performance and increasingly cautious investor positioning. As positioning has declined, there may be more room for investors to increase equity exposure if the market continues higher.

That matters particularly for professional money managers. Many active managers reduced exposure to the largest technology companies as market leadership broadened earlier this year. If Big Tech continues outperforming, those managers risk falling behind their benchmarks and may eventually feel pressure to increase exposure.

The same dynamic applies to investors sitting in cash or waiting for a larger correction. As stocks continue rising, the question gradually changes from “What if I buy and the market falls?” to “What if I remain underinvested and the market keeps rising?”

That is one of the ingredients that can produce what is sometimes called a melt-up. It does not mean one is inevitable. But if investors are cautiously positioned and the companies driving the indexes continue producing strong earnings, rising prices can eventually force money back into the market. In other words, pessimism can become fuel for a rally.

Reasons to Remain Grounded
There are still plenty of reasons for caution. Treasury yields above 5% represent genuine competition for stocks. Oil and inflation remain risks, and the extraordinary amount of capital flowing into artificial intelligence deserves scrutiny.

Some of the financing arrangements surrounding AI also warrant attention. Vendor financing and increasingly complicated relationships among chipmakers, data-center operators and AI developers raise legitimate questions about whether every dollar being invested will ultimately generate an adequate return. A technological revolution and financial excess can exist at the same time.

But there is an important distinction between questioning whether some AI investment has become excessive and assuming that the earnings supporting today's largest technology companies are about to disappear. For now, profits continue to grow, and investors appear to be moving back toward companies with some of the strongest earnings and balance sheets in the market.

Final Thoughts
The most interesting development may simply be how many potential headwinds the market continues to absorb. Treasury yields are above 5%, bond volatility has increased, the Fed has raised rates and geopolitical uncertainty remains high. Yet stocks continue to rise, earnings remain strong and market leadership is shifting back toward large-cap technology. Big Tech may increasingly occupy an unusual position in this market: offering the growth associated with AI while also providing the earnings, cash flow and balance-sheet strength investors seek when uncertainty rises.

None of this eliminates the risks from higher rates, AI investment or elevated valuations. But with investor positioning still cautious and many professional managers underweight the companies leading the market, continued strength could force more money back into stocks. The irony is that the skepticism surrounding this rally may ultimately become one of the forces that keeps it going.

It is our aim at Asbury Wealth Partners that you find the market commentary we provide informative and useful. As our success grows mainly through referrals from our clients, we encourage you to share this weekly newsletter with your friends, family, and colleagues. If you are a client, we thank you for your business and your confidence. If you are not yet a client, we encourage you to contact us today and explore how our team may be able to add value to your unique financial situation.

Thank you,

Paul O'Hara, CFP®
[email protected]

Send a message to learn more