Capital at Work: The Bull Market Turns Four Today. It Grew Tall Narrow Roots

Weekly Commentary  ·  Week of October 9, 2026

Good morning, [First name].

Four years ago today, on October 12, 2022, the S&P 500 hit its bear market low. Since then it has returned 131 percent including dividends, about 23 percent a year, by the count of J.P. Morgan’s David Kelly. Last week it set another record close on Tuesday and finished the week up 1.2 percent. The Dow gained 0.9 percent and the Nasdaq 0.6 percent. The 10-year Treasury yield touched its highest level in 24 years midweek, near 5.37 percent, before ending the week at 5.24 percent.

Michael Cembalest of J.P. Morgan spent time recently with clients in California and came home with a title for his October 8 Eye on the Market: Califoreboding. With stocks close to all-time highs, he wrote, many client questions he received were “laden with a sense of foreboding.” He did not treat the worry as a flaw. On his podcast he said nervousness at a market high reflects discipline, the instinct to sell high and buy low.

His data shows why. Since January 2024, a basket of 42 AI-related stocks, fewer than one in ten companies in the index, has produced about two-thirds of the S&P 500’s price gains and 81 percent of its growth in capital spending and research. Meanwhile, 60 percent of the stocks in the index sit 20 percent or more below their own all-time highs, even with the index near a record. Only 30 percent of companies have beaten the index over the past three years, one of the lowest readings since 1991. The tree has grown tall. Its roots are narrow.

Last week offered a small test of those roots. On Thursday, the Financial Times reported that one of the largest AI developers had told investors its annualized revenue was approaching $50 billion, about $20 billion less than earlier investor materials showed; the paper said the new figure was calculated to be comparable with a rival’s. Chip stocks fell as much as 4 percent that day and the Nasdaq about 1.2 percent. Yet the S&P 500 still finished the week up 1.2 percent, outpacing the tech-heavy Nasdaq. For one week, the rest of the garden carried more of the weight.

Cembalest is not calling a top. He notes that the gains since January 2024 have come mostly from earnings rather than rising valuations, though tech is not cheap, and that markets driven by earnings have tended to be less prone to rapid declines than markets driven by valuations.

Depends who’s counting. Private credit, loans made directly to companies by investment funds rather than banks, has become a popular source of income. Several industry trackers put its default rate at 1 to 3 percent. A J.P. Morgan team counted more broadly, including loans that have stopped paying cash interest, maturities pushed out more than two years at marked-down prices, loans swapped for equity, and loans valued below 80 cents on the dollar. By that count, Cembalest reports, stress among the business development company loans they studied is closer to 15 percent. Realized losses are still low. The headline number and the number underneath can tell different stories, in credit as in stocks.

The rest of the week, briefly. Minutes of the Fed’s September meeting showed most officials assessed that another rate increase would likely be appropriate by year end. The University of Michigan’s preliminary October reading of consumer sentiment fell to 46.3 from 48.1, below forecasts.

Foreboding is not a forecast. It is a signal to check the balance. It is tempting, David Kelly said on Monday’s podcast, to read a surging stock market as a prelude to a fall, or the bond market’s message as something very troubling. His own view is that the likeliest path from here is moderation: slower growth, cooler inflation and more modest returns. But he reached the same conclusion Cembalest’s numbers point to. Many portfolios have grown large in this bull market, and because of the AI boom, they have grown unbalanced.

That is the quiet risk in a long bull market. The stocks that did the most growing are often the ones that tipped the balance, and a portfolio that began with a sensible mix can drift toward the very concentration that makes people uneasy. Gardeners do not pull up the tallest tree. They prune it, so the rest of the garden gets light. That is what rebalancing does, and it is why we have been reviewing portfolios for rebalancing and taking gains where we think it is appropriate. As we research alternatives for income and diversification, the private credit numbers above are the kind of question we ask first. We continue to advise investors to be disciplined in adhering to their investment policy and patient when the markets’ winds are pushing against the planned course.

Wednesday brings the September consumer price index. Consensus estimates call for a 0.6 percent monthly rise that would lift annual inflation to 3.6 percent from 3.4 percent, with core inflation at 2.5 percent. The Fed’s Beige Book is due the same day, and retail sales and producer prices arrive Thursday.

Third-quarter earnings season opens Tuesday with the largest banks. Analysts expect S&P 500 earnings to grow 29.5 percent from a year earlier, according to FactSet’s October 2 estimate. With so much of the market’s gain resting on so few companies, how widely that growth is shared may matter as much as the total. The Fed next meets October 27 and 28; fed funds futures, as tracked by the CME FedWatch tool and reported by Kitco on October 9, put the odds of at least one more quarter-point increase by December at about 84 percent.

 

If the numbers in this letter have you wondering how balanced your own portfolio is, just reply to this note. We read every response.

[Advisor first name]
[Title], NDS Wealth Advisors
Prefer to talk something through? Schedule 15 minutes.

 

Sources  Index levels and weekly changes: TheStreet and Investrade market reports, and Investopedia via Yahoo Finance, October 9, 2026; weekly changes computed against the October 2 closes published in last week’s letter. Record close and Russell 2000: The Glass Desk weekly market review and TheStreet, October 9, 2026. Treasury yields: U.S. Department of the Treasury daily par yield curve rates, October 2 and October 9, 2026; midweek high as reported by Investopedia and Investrade, October 9, 2026. Oil: WTI settlement as reported by Investrade and The Glass Desk, October 9, 2026. Gold: spot price as reported by Kitco, 3:29 p.m. ET, October 9, 2026; weekly change computed against the October 2 spot level published in last week’s letter. J.P. Morgan views and data: Michael Cembalest, Eye on the Market, “Califoreboding,” October 8, 2026, and the accompanying podcast, citing Bloomberg, FactSet and JPMAM data; David Kelly, J.P. Morgan Asset Management weekly podcast, October 12, 2026. AI revenue report: Financial Times, October 8, 2026, as reported by Dow Jones Newswires; chip stock and Nasdaq moves as reported by Yahoo Finance, October 8, 2026. Federal Reserve: minutes of the September 15 and 16, 2026 FOMC meeting, released October 7, 2026, as summarized by PNC Economics. Consumer sentiment: University of Michigan Surveys of Consumers, preliminary October 2026 reading, as reported by TheStreet. Earnings estimates: FactSet, October 2, 2026. Economic calendar and consensus estimates: Newsquawk, October 9, 2026. Rate probabilities: CME FedWatch tool, as reported by Kitco, October 9, 2026. Quote: Elroy Dimson, as quoted by Howard Marks. NDS Wealth Advisors believes these sources are reliable but cannot guarantee the accuracy or completeness of third-party data and assumes no liability for errors or omissions.

Disclosures  This material is for informational and educational purposes only and should not be relied upon as investment, legal, or tax advice, or a recommendation of any particular security, strategy, or investment product. Any economic forecasts or market outlooks expressed herein are forward-looking statements, subject to change without notice, and may not materialize. Investors cannot invest directly in an index. Index returns do not reflect the deduction of fees, commissions, or expenses, which would reduce overall performance. Past performance does not guarantee future results. Diversification does not guarantee investment returns and does not eliminate the risk of loss. This material does not consider the investment objectives, financial situation, or unique needs of any individual investor. Consult your financial advisor before making any investment decisions. Views attributed to Michael Cembalest and David Kelly of J.P. Morgan are paraphrased from their commentary and podcasts of October 8 and October 12, 2026, reflect their opinions as of those dates, and are not recommendations by NDS Wealth Advisors. Alternative investments involve illiquidity, higher fees, and limited transparency and are appropriate only for certain investors.

NDS Wealth Advisors · Providence and Jamestown, Rhode Island · [Street address inserted by Snappy Kraken] · Unsubscribe