Here’s how they are looking at artificial intelligence, interest rates and economic pressures.
4 min
The S&P 500 just completed one of its best three-year runs ever, rising around 80% from the start of 2023 through New Year’s Eve. Wall Street thinks the party is just getting started.
Few expect the good times to keep rolling indefinitely, but you would be hard-pressed to find a major bank predicting anything except more gains in 2026.
Yet worries abound about the stretched valuations of artificial-intelligence companies, the path of interest rates and the outlook in Washington, D.C.
So we asked five investors where they’re putting their money:
Count Alex Chaloff among the investors concerned about a reckoning with the huge gains in AI stocks.
The chief investment officer at Bernstein Private Wealth Management fielded questions from clients on the topic all last year.
After several years of huge returns, he is advocating a more surgical approach to picking stocks.
“On one hand, they’re thrilled with the returns. On the other, they’re scared of what the next chapter is, because I’ve been telling them: It’s 1990-something,” Chaloff said, referring to the final years of the dot-com bubble.
“Our view is that we still have room to run, but there will be an end to this.”
Chaloff isn’t selling out of AI, but he is happy to help concerned clients seeking protection against declines in the whole index or a handful of individual big tech stocks.
One tool he is using is buffered exchange-traded funds, which seek to smooth out market swings. Those offer “some upside exposure with either defined or variable protection, and a great level of visibility, transparency and liquidity,” he said.
Bernstein is also working on an “AI loser” list, screening specifically for companies with high debt loads and low free-cash flow—those that have gotten AI hype, but might lack the fundamentals to survive an arms race.
He also holds an upbeat outlook for U.S. growth, especially if the Supreme Court ends up striking down President Trump’s tariffs: “I think that possibility is being overlooked a bit. It could reduce inflationary pressures, allow more rate cuts and accelerate the economy.”
Tech bulls point out a key difference between now and the dot-com bubble: Today’s most-valuable companies, such as Nvidia, Microsoft and Alphabet, are some of the most profitable in history. And those profits are growing fast.
Saira Malik , who oversees $1.4 trillion as chief investment officer at Nuveen, thinks there is more upside ahead to the technology and AI trade, and she plans to add to some of her favorite holdings in 2026. It all comes down to profits.
The Magnificent Seven tech companies plus chip maker Broadcom —a group Malik is now referring to as the “Great Eight”—are forecast to grow earnings by 24% this year, well over double the forecast for the S&P 500 as a whole.
“We think the earnings growth and future growth justifies the premium valuations in tech, which will continue to dominate and lead the S&P 500 higher,” Malik said.
Tech stocks’ years long dominant run has made a handful of the biggest companies a larger share of the S&P 500 index than ever, making some investors fret over concentration risk. Malik shrugs those concerns off.
“I don’t necessarily say the market has to broaden out for it to be healthy. We’ve been living in this world of tech dominance for basically a decade straight…as long as the earnings power is there, the stocks will follow,” she said.
Outside of stocks, Nuveen expects municipal bonds and private equity both to bounce back in 2026.
Heavy supply of new muni bonds led to them lagging behind taxable bonds last year, a trend that Malik expects to reverse in a “catch-up trade.” Private equity, meanwhile, stands to benefit from lower interest rates and a pickup in deal activity, she has told clients.
Concentration risk isn’t just a stock-market issue, says Jack Ablin , chief investment strategist at Cresset Capital. He worries about the growing share of consumer spending coming from wealthy individuals, which he said puts the economy at risk as well.
“We have a narrowing prosperity on both Wall Street and Main Street, and it probably does create a vulnerability. A minority of the participants are accounting for most of the results,” Ablin said.
Stock owners are feeling a wealth effect that leads to freer spending. That could change quickly during a market downturn, however, leading to a scenario where a drop in the stock market could push the economy into a recession, Ablin said.
Cresset has leaned into value stocks and small-caps recently, expecting that both will benefit from interest-rate cuts and lower financing costs this year.
When it comes to AI, Ablin isn’t ready to pick winners and losers.
“I don’t have a crystal ball. So we buy everything for now, and the winners will ultimately pay for the losers.
Raymond James Chief Investment Officer Larry Adam thinks stocks will have a more modest 2026, projecting around a 4% gain for the S&P 500.
Equity valuations will struggle to move higher than they currently are, meaning those gains will need to come from earnings growth, he said.
“I think the market is vulnerable to some disappointment after going so long with remarkably low volatility,” he said.
Raymond James is adding to bets on the industrials and consumer discretionary sectors this year. Industrials look like an indirect AI play, since they act as suppliers to utility companies and others helping build out AI infrastructure.
Consumer discretionary stands to benefit from a pickup in consumer spending, Adam reckons, with major tax refunds from the One Big Beautiful Bill Act set to hit pockets this spring.
Is there an AI bubble? Rob Arnott says yes, though the Research Affiliates founder and chairman cautions that it isn’t easy to profit on that idea.
“Shorting a bubble is a very fast way to go bankrupt. Bubbles can last longer and go further that you can imagine,” he said.
Like many on Wall Street, Arnott is convinced that AI is the “real deal” and a technological revolution is coming.
But he also warned that technological revolutions take time to play out—and said it is far too early to know which companies will emerge from the pack. During the dot-com boom, he said, Lucent and Nokia numbered among the world’s most-valuable companies.
“Dating back to the industrial revolution, every time you see major disruption there are winners and losers. A lot of losers,” he said. “The disrupters get disrupted.”
Arnott is now running a strategy that automatically trims exposure to stocks if their valuations soar quickly. “Just like averaging in is a time-honoured way to build a position in something cheap, averaging out is a great way to reduce exposure to what’s frothy and expensive,” he said.
With the profits taken from trimming exposure to fast-growing names, Arnott is putting money into areas that look cheaper and less loved, such as international and value stocks, to boost diversification.
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Investors are bracing for a bumpier fall stock market due to shifting odds of a Federal Reserve interest-rate increase and other macro challenges.
3 min
The stock market had a decent summer. Investors are bracing for a bumpier fall.
In the past couple of months, equity investors cheered soaring profits at big companies, shrugged off jitters in the bond market and nudged megacap tech shares back near records.
Now, as the post-Labor Day stretch begins, a number of new challenges lie ahead: ever-shifting odds of an interest-rate increase from the Federal Reserve. Sky-high expectations after a stunning earnings season. The persistent threat of higher consumer prices as fighting in the Middle East drags on.
“You’re moving from this earnings-driven market to this macro-driven market with the Fed, inflation and interest rates in focus,” said Keith Lerner, chief investment adviser for Truist Advisory Services. “It tends to be a choppier period.”
Historically, every major U.S. stock index experiences its worst average return in September. The Dow Jones Industrial Average has slid an average 1.1% in the ninth month of the year, in data that dates back to the 19th century. The S&P 500 has seen the same average decline—and for every September dating back to 1928, the benchmark ends the month lower more than half of the time.
Analysts caution against reading too much into those seasonal patterns. But in recent weeks, new reasons for investor caution have emerged. One of the largest: the looming threat of an interest-rate increase from the Fed, which announces its next policy decision on Sept. 16.
Chairman Kevin Warsh’s decision to ditch forward guidance and take more of his cues from markets has muddied the waters for investors when it comes to monetary policy. That has left traders scouring Fed governor speeches and economic-data reports for clues on the central bank’s next move.
“There’s going to be a lot of eyes on those numbers,” said John Luke Tyner, head of fixed income and portfolio manager at Aptus Capital Advisors.
The past couple of weeks offered just one example of how frequently those expectations can change. After Warsh struck a hawkish tone during remarks on Aug. 28, the odds of a hike at the Fed’s next meeting jumped from 35% before the speech to 58%, according to CME FedWatch data.
On Thursday, Fed governor Christopher Waller made a case for leaving rates where they are. Interest-rate futures showed coin-flip odds between a hike and a hold. Then Friday’s robust jobs report amped up rate-hike bets once more, back to a roughly 60% chance of higher rates after the meeting.
“Rates have really been driving the car for equities the last few weeks,” said Ross Mayfield, an investment strategist at Baird.
That uncertainty comes as an unruly bond market could put pressure on stocks. Treasury yields have marched higher for much of the summer, driven by concerns about rising oil prices, growing U.S. budget deficits and a deluge of tech-company bonds now competing for investors’ cash. Last week, the rout went global, pushing yields to multiyear highs in Japan, Germany and the U.K.
Higher bond yields can drag on stock prices and lift borrowing costs for companies and consumers across the economy.
Rising prices remain the top concern for bond traders, and continued fighting between the U.S. and Iran has done little to ease those worries. The national average price of diesel climbed to a record of $5.850 on Friday, according to AAA. That is up from $3.712 a year ago.
Investors will get more insight on the path of prices this week, with the much-awaited consumer-price index report due Friday and a reading on producer prices Thursday.
With another blockbuster earnings season in the books, some analysts have also warned that any boost from the third-quarter reports due in the coming months could be minimal. Back-to-back quarters of standout profits have raised expectations and made it especially difficult to impress traders. Custom-chip company Broadcom, for example, said Wednesday that it more than tripled its earnings and nearly doubled its revenue. Shares slipped 2.7% the next session.
Many analysts note there are plenty of reasons not to panic. The economy is in impressive shape, thanks to a healthy labor market and the rippling effects of the artificial-intelligence investment boom. Profits are booming at America’s biggest companies. The Cboe Volatility Index has dropped to its lowest levels of 2026. Credit spreads are tight, a sign bond investors aren’t concerned about economic conditions that could hurt companies.
But the mood has shifted from the euphoria that felt tangible when the Nasdaq was notching back-to-back records early this summer. The question, Mayfield said, is whether the fundamentals that have bolstered the bull market so far can stretch the rally into 2027.
“There are more anxieties or uncertainties about the backdrop,” he said. “It does feel like a transitional moment.”
