Five for Friday – September 18, 2026

Rate Hikes, Thematic Investing, Bubble, New Business, and Cards 

1. Rates

In late 2025, the Federal Reserve cut interest rates on the view that labor market weakness outweighed inflation risks (“risks to employment have risen”). Since then, unemployment has fallen, job growth has reaccelerated, and leading indicators are pointing in the right direction. But while employment looks better, inflation does not. As a result, the Fed hiked interest rates this week for the first time since 2023. And while hikes are often viewed as a headwind for stocks, the S&P 500 has actually averaged a gain of 40% in the three years following the first hike in a tightening cycle. But the Fed is also rarely one-and-done, so we’ll be watching the speed of their moves and the overall growth backdrop.  

 2. Themes

It’s well established that the average investor tends to lag the stock market due to poor timing and overtrading. As it turns out, the performance gap is even larger for thematic ETFs: Morningstar recently found that while thematic funds returned 12% annually over the past decade, the average investor earned just 3%. With almost identical frequency, investors exited these ETFs ahead of big gains and rushed in ahead of big losses. It’s not that investors chose the wrong themes, but they seemed to chase recent gains and hot trends instead of building the sort of conviction that can withstand downturns. Another lesson from the study: an investor can be right on the theme and still lose money, either because the perceived upside is already reflected in the price or because the investor identified the right theme but the wrong investment (e.g., Betamax, BlackBerry, Netscape). In hot markets, tread carefully. 

3. Bubble

While I do my best to highlight five unique items every week, some bigger picture things are worth revisiting often. One is the comparison between today’s market and the dot-com bubble, both because of the parallels (transformative tech, big spending, etc.) and because the dot-com bubble is often referenced in media. But not every bull market is a bubble, which is why it helps to compare today’s price action to a true bubble with the benefit of hindsight. And when compared to the insanity that was the market in the late ‘90s… recent action looks downright serene. As for other symptoms of froth, Baird Strategas CEO Jason Trennert notes that interest rates are beginning to merit worry, but only two of the nine items on his Bull Market Top Checklist are marked.

4. New biz

While we’re at it, another item I have highlighted over the years is new business applications, both as a temperature check for risk appetite and because, to me, the post-Covid surge in entrepreneurship is a bullish tailwind for the decades to come. And the ride continues, as the 3-mo. rolling average of new business applications hit a record high last month. AI is likely making it easier to get things off the ground, but the mixture of innovation, risk-seeking capital, and entrepreneurialism has always been America’s forte – creating jobs, wealth, and the building blocks of future bull markets.

5. On this day

in 1958, the modern credit card – i.e., general use, revolving credit – was born when Bank of America dropped ready-to-use “BankAmericards” on 65,000 Fresno households. After some fits and starts, the modern credit card industry was born and American consumerism never looked back. And while the $1 trillion in credit card debt draws negative headlines, delinquency rates are low by historical standards and have actually decreased for eight straight quarters.

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This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Market and economic statistics, unless otherwise cited, are from data provider FactSet.

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