CIM - Market Perspective: September 2026
From Matt's Desk: September, 2026.
The Market Is Still Working. But the Warning Lights Are Getting Brighter.
The stock market remains relatively strong, and we are not forecasting an imminent recession or market crash. But beneath the surface, several things have changed enough that we believe this is a good time to become a little more cautious.
Long-term interest rates remain a concern. Inflation has proven difficult to completely eliminate. Federal deficits continue to grow. The dollar has faced periods of weakness, while gold and other hard assets have attracted significant investor interest.
At the same time, valuations in parts of the stock market—particularly technology and AI—have become increasingly expensive.
None of these things, by themselves, tells us the market is about to decline. Taken together, however, they suggest that the margin for error may be getting smaller.
Our View: This is not a time to panic or abandon the market. It is a time to pay closer attention to risk.
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2000, 2008... or the 1970s?
We have spent considerable time looking at previous market cycles to see where today's environment might fit.
Interestingly, we don't think 2008 is the best comparison.
The 2008 financial crisis was largely a banking, housing and credit crisis fueled by excessive leverage. While risks always exist beneath the surface, we do not currently see evidence of the same combination of financial stresses that preceded the 2008 crisis.
There are, however, some interesting similarities to 2000.
In the late 1990s, investors correctly recognized that the Internet was going to change the world. The mistake wasn't necessarily believing in the technology. The mistake was assuming that virtually every company associated with that technology justified almost any valuation.
Artificial intelligence may eventually prove every bit as transformational as the Internet. We believe AI will create enormous opportunities. But a great technology and a great investment are not always the same thing—particularly when expectations are already extremely high.
There are also echoes of the 1970s.
Persistent inflation, government spending, rising debt and periods of slower economic growth can create a difficult environment for traditional investments.
We are not predicting a return to the 1970s. But the comparison is important enough that we are watching inflation, Treasury yields, commodities, gold and the dollar very closely.
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Keep an Eye on the Bond Market
One of the most important developments isn't occurring in the stock market at all. It's happening in the bond market.
The United States must finance increasingly large amounts of government debt. If investors require higher yields to absorb that debt, long-term interest rates could remain elevated even if the Federal Reserve would prefer lower rates.
Why this matters.
Higher long-term rates increase mortgage rates, corporate borrowing costs and government interest expense. They can also create more competition for stocks because investors may be able to earn attractive returns from bonds without assuming as much equity risk.
This is one reason we believe the Treasury market deserves just as much attention today as the S&P 500.
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Then There Is the Dollar
Another issue we are watching is the long-term purchasing power of the dollar.
Large government deficits, growing debt and changing monetary policy have caused a number of respected economists and market strategists to examine whether investors should think differently about preserving wealth over the next decade.
This doesn't mean the dollar is about to collapse.
It does mean there is an important difference between preserving dollars and preserving purchasing power.
Over long periods, certain assets—including ownership in quality businesses and some real assets—may respond differently to inflation than investments providing fixed dollar payments.
We believe this is becoming an increasingly important consideration in long-term portfolio construction.
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So What Are We Doing?
We aren't making an all-or-nothing market call.
We aren't moving everything to cash, and we certainly aren't trying to guess the exact day the market peaks.
Instead, we are becoming incrementally more selective.
Where appropriate, that may mean trimming positions that have become unusually large or expensive, maintaining adequate liquidity, being careful about chasing momentum, and continuing to own high-quality businesses that we believe have attractive long-term prospects.
If the warning signs become more serious, we can become more defensive. If conditions improve, we can adjust in the other direction.
That's very different from trying to predict a crash.
The objective isn't to predict the top. It's to recognize when the potential reward may no longer justify taking the same amount of risk.
For now, we would describe the investment environment as:
YELLOW TO ORANGE — NOT RED.
Market conditions remain supportive in several important respects, but risks have increased enough that we believe discipline and selective risk reduction are appropriate.
Most importantly, every client's situation is different. Someone drawing income from a portfolio has very different needs than someone investing for another 10 or 20 years.
Any changes we make will continue to be based on each client's individual circumstances, investment objectives, liquidity needs, tax considerations and long-term financial plan.
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Further Reading
The following outside research helped inform our thinking. We include these links for clients who would like to explore some of these issues in greater detail. The views expressed in these articles belong to their respective authors and do not necessarily represent our views.
42 Macro | August 26, 2026Is 42 Macro's Stock Market Bubble Thesis Intact?A short discussion of today's unusual combination of strong market conditions, elevated valuations and increasing investment risk.
42 Macro | October 30, 2025Can the Traditional 60/40 Portfolio Survive Fiscal Dominance?A discussion of government borrowing, the Treasury market and whether the traditional mix of stocks and bonds may need to evolve in a different inflation and fiscal environment.
Stansberry Research | August 31, 2026Nobody's Buying ItCommentary on inflation, rising bond yields, government debt and Federal Reserve policy.
Stansberry Research | September 2, 2026AI Is Distorting RealityA discussion of artificial intelligence, monetary policy and the ways AI could increasingly influence financial markets.
Important Information
The views expressed are based on current market conditions and are subject to change without notice. References to historical market periods are for illustrative purposes only and should not be interpreted as a prediction of future market performance.
Third-party research and links are provided for informational purposes only. Clements Investment Management is not affiliated with these third parties, and inclusion of a source should not be interpreted as an endorsement of the source or all views expressed by its authors.
This commentary is general in nature and is not intended as individualized investment, tax or legal advice. Investment decisions should be based on each investor's individual circumstances, objectives, risk tolerance and financial situation. All investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.