Market Commentary
Prelude to 2026
As the calendar year comes to a close, prepare yourselves for the year-end ritual of forward price targets.
The purpose of this note is to lay the foundational understanding for where things stand now, so that we may have a more informed contextual understanding of what is about to hit us from those in the astrology forecasting business.
We start with the pink elephant in the room, which is the AI trade and its comparisons to the dot com era.
Just as Fed Chair Alain Greenspan opined on the state of the trade with his “irrational exuberance” commentary, so has the current Fed Chair had a word or three to say on the current AI trade. At the October 29, 2025, post FOMC presser, he said:
“This is different in the sense that these companies that are so highly valued actually have earnings … If you go back to the 90s and the dot com (era), these were ideas rather than companies. So, there was a clear bubble there.”
Regardless of if it is a bubble or not, the AI trade is a much bigger macro factor for the U.S. and the global economy than the dot com one was in 1999.
At the 1999 peak, U.S. stocks were 51% of world market cap.
Currently at 65%.
Of this 65%, Mag7 + Broadcom are 24-points of this 65%.
Eight U.S. tech companies are nearly a quarter of global market cap.
To Powell’s point about profitability and the commonly accepted narrative of stronger earnings in 2025 versus profitless hype in 1999, at the index level, S&P500 earnings