Recorded on September 23, 2026.
In this market update, Chief Investment Strategist Jack Ablin and Founding Partner & Co-Chairman Doug Regan examined how a new interest rate environment is reshaping markets, investment decisions, and the broader economy. The discussion explored the transition of artificial intelligence from a productivity tool to a broader economic force, the challenges facing the U.S. housing market, the implications of higher long-term interest rates, and the factors supporting equity markets despite elevated valuations. Throughout the conversation, the team emphasized the importance of understanding where long-term structural trends are creating opportunity while remaining disciplined as investors navigate a changing macroeconomic landscape.
Key Topics
AI Enters Its Next Phase
The discussion framed artificial intelligence as moving beyond productivity gains toward becoming a broader societal and economic force. Drawing comparisons to past technological revolutions, the team explored how today’s significant investment phase may eventually give way to wider adoption, regulation, and new industries that extend well beyond the technology companies building AI platforms.
Innovation Creates More Than Technology Winners
Rather than focusing solely on which AI companies may emerge as long-term leaders, the conversation highlighted the broader ecosystem that often develops around transformational technologies. Similar to the growth of industries supporting automobiles and railroads, AI is expected to create opportunities across infrastructure, services, and entirely new business models.
Housing Remains a Key Economic Constraint
Higher mortgage rates continue to suppress housing activity, limiting affordability and reducing both transactions and new construction. With mortgage rates near 7%, the housing market remains an important drag on economic activity, and meaningful improvement may require rates to move closer to 6% before demand begins to recover.
Higher Rates Are Changing Investment Decisions
With investment-grade bonds now offering yields comparable to many long-term equity return expectations, investors face a very different allocation environment than they have experienced over the past decade. The team discussed how higher interest rates are influencing portfolio construction, valuations, and long-term capital market assumptions.
Valuations Face Pressure, but Earnings Continue to Support Markets
While equity valuations remain elevated relative to history, strong corporate earnings continue to provide an important foundation for the market. The discussion emphasized that valuation alone is rarely an effective market-timing tool and should instead be evaluated alongside earnings growth, interest rates, and broader economic fundamentals.
Market Sentiment May Be More Constructive Than It Appears
Investor sentiment has become increasingly cautious, with bearish positioning reaching historically low levels. The team noted that periods of widespread pessimism have often coincided with stronger subsequent market performance, underscoring the importance of maintaining a disciplined long-term perspective.
Momentum and Credit Conditions Remain Supportive
Despite ongoing macroeconomic concerns, technical market trends and credit conditions continue to point toward a relatively constructive backdrop for equities. Healthy lending conditions and positive market momentum suggest that underlying financial conditions remain supportive even as investors navigate higher rates.
Balancing Opportunity With Discipline
The discussion concluded that today’s investment environment requires greater selectivity than in recent years. Higher interest rates, evolving AI investment cycles, and ongoing economic adjustments present new risks, but also create opportunities for investors who remain focused on long-term fundamentals, diversified portfolios, and disciplined decision-making.
