Current Market Summary

We wanted to share some timely insights from our ongoing conversations with industry experts about current market trends, corporate profits, artificial intelligence, interest rates, and inflation. Our recent discussion with Roberto “Roby” Fatta of First Trust provided valuable perspectives on what’s happening beneath the market headlines.

Roby was optimistic about the opportunities ahead, while recognizing the risks. What I appreciated was that he explained the reasoning behind his outlook. 

Here are the points I thought were most useful. The slide references below refer to Roby’s presentation.

Why can the market do well when the news sounds so bad?

Roby’s starting point was corporate earnings. Over time, the profits businesses generate are an important foundation for stock prices. Headlines can move markets quickly, but the underlying question is whether companies are becoming more or less profitable.

His earnings chart showed how S&P 500 profits have grown over many years, with setbacks during periods such as the financial crisis and the pandemic. It also showed forecasts for further growth. Those forecasts are encouraging, but they still need to turn into actual results. Valuations matter too: even a good business can become an expensive investment. (Slides 2–3)

One detail stood out. According to the Capital IQ data in his presentation, the consensus estimate for 2027 S&P 500 earnings per share increased from $354.53 at the end of 2025 to $416.41 as of September 30, 2026, an increase of approximately 17.5%.

That is an upward revision to the forecast for the same year. It does not mean the market will rise 17.5%, and it is not a report of earnings already achieved. It does help explain why investors can see reasons for optimism even when the news feels discouraging.

During our conversation, I asked Roby what gave him confidence in American businesses. He pointed to our entrepreneurial culture, innovation, and access to capital. His view was that these strengths continue to support the ability of businesses to adapt and grow.

Roby also pointed to continued consumer spending as a source of economic support. His assessment was that employment conditions and tax-related cash flow were helping households keep spending, although the experience is not the same across income groups. Together with investment in AI infrastructure, this was an important part of his explanation for the economy’s resilience.

The AI story is much bigger than a few technology stocks

If artificial intelligence makes you think only of Nvidia or ChatGPT, Roby’s presentation offered a broader picture.

He described five layers: the computing capacity, the semiconductors, the AI models, the software that makes them useful, and the physical infrastructure supporting everything. That last layer includes electrical equipment, cooling systems, construction companies, and skilled trades. (Slides 4–6)

The presentation cited a Bloomberg Intelligence forecast that global data center spending could reach $1 trillion by 2027. This is a forecast, not a completed spending total. The point is the potential scale of the investment and how widely it can reach through the economy.

One memorable image compared the footprint of Meta’s Hyperion project with Manhattan. The project is in Richland Parish, Louisiana; Manhattan was there to help us understand its size. A project like this needs much more than computer chips. It needs buildings, power, cooling, suppliers, and workers. Construction creates one set of opportunities, and operating the facility creates another. (Slide 5)

I asked which part of this story investors might be overlooking. Roby emphasized the physical infrastructure. That does not mean every company involved will be a good investment. We still need to consider profitability, competition, and the price paid for a business. It does mean the economic opportunity could extend well beyond the best-known technology names.

What about the electricity these data centers need?

This was one of the subjects I wanted to explore because it connects a national investment theme with a very practical local question: will our electricity bills go up?

Roby’s answer was that it depends. Available generating capacity, peak demand, and the arrangements for paying for new infrastructure all matter. An area that needs substantial new capacity may face different costs from one that can accommodate additional demand more efficiently.

He also identified power availability as a potential limit on the pace of AI development. In our discussion of competition with China, he described U.S. strengths in leading AI models and advanced chips, while pointing to power generation as an important competitive challenge. These were his assessments, and they reinforce why the AI outlook involves more than technology alone.

Why can your bonds show a loss when they are still paying interest?

Before we got to bonds, Roby explained why the speed of interest rate changes matters for the economy. He used a mechanic considering an additional service bay: higher financing costs make an expansion harder to justify. That same calculation happens across businesses and can slow investment.

We also hear the bond question frequently, so I was glad we spent time on it.

When market interest rates rise, an existing fixed-rate bond generally becomes less attractive relative to newly issued bonds offering higher yields. Its market price can fall even though it continues to make its scheduled interest payments. Individual bonds and bond funds both face interest rate risk. (Slide 7 and our Q&A)

As I mentioned that evening, custodial statements can show those daily price changes on individual bonds too. A lower statement value does not, by itself, mean the issuer has stopped paying or that its ability to repay has changed.

For an individual bond held to maturity, the contractual payment is generally its face value, subject to the issuer meeting its obligations and the bond’s terms. Face value may differ from what an investor originally paid. Most traditional bond funds do not have a single maturity date when all shareholders receive a fixed amount back.

We also discussed bond ladders, which spread maturities over several years. As bonds mature, proceeds can be used for spending or reinvested at prevailing yields. Higher yields can improve future income opportunities, although they do not immediately undo an earlier price decline.

For your plan, the question is what job the bonds are supposed to do and when you may need the money.

Inflation can slow while your grocery bill stays high

Roby’s apple example brought this home. In a simplified illustration, an apple starts at $1.00. More money competing for the same supply raises the price to $1.30. Reducing the available supply of apples by half raises that illustrative price to $2.60. (Slides 9–13)

The example helps separate different sources of price pressure. Roby emphasized the distinction between monetary expansion and disruptions to supply. Both supply and demand can contribute to inflation, and a supply disruption can last longer than expected. The cause matters when we assess whether price pressure may ease or persist.

For household budgets, there is another important distinction: lower inflation usually means prices are rising more slowly. It does not mean yesterday’s higher prices disappear.

This is especially important in retirement. If your income stays at $100 while the expenses it needs to cover rise to $105, you have a shortfall even though the income payment itself has not changed. That is a hypothetical example, but the planning issue is real. We need to think about what your income can buy over time, including your own mix of healthcare, housing, travel, and everyday expenses.

Why we discussed investments beyond stocks and bonds

Our conversation turned to alternatives, a broad category that can include commodities, real estate, gold, and other strategies. These investments can behave differently from traditional stocks and bonds and may help diversify a portfolio.

Roby used the idea of a rocket with multiple engines: different parts can contribute at different times. I thought it was a useful way to picture why we do not expect every investment to lead the portfolio at once.

Of course, alternatives are not interchangeable. Some have substantial fees or limits on access to your money. Gold does not produce contractual income and can fluctuate considerably. The role and size of any allocation need to fit the individual plan. Diversification can help manage risk, but it cannot eliminate losses.

The federal deficit is a concern, but it needs context

I asked Roby whether there was a constructive way to think about the federal debt and deficit. He acknowledged the challenge and pointed to the country’s economic strengths and capacity to grow. (Slide 8)

The deficit is the annual gap between government spending and revenue; debt reflects accumulated borrowing. Interest costs matter because carrying that debt becomes more expensive as financing costs rise.

Economic growth can help support the government’s revenue base and improve its capacity to manage debt. It does not make persistent deficits harmless. Private household wealth also is not government cash available to pay federal obligations. My takeaway was to watch both the fiscal challenges and the productive strength of the economy.

What can election history tell us?

Roby showed historical charts comparing volatility and returns around midterm elections. His view was constructive about the period after the election, in part because businesses can make decisions with greater clarity once the outcome is known. (Slides 14–16)

The historical quarterly averages in his presentation were stronger after midterms than in the quarter before them. But averages are not promises, and individual years can look very different. They do not give us a reliable date to buy or sell.

What I found useful was the perspective: companies have operated through many political environments. Policy matters, but an election result alone does not tell us what the market will do next. We continue to look at earnings, valuations, and the needs of the families we serve.

Smaller companies can have a very specific opportunity

Toward the end, I asked Roby about his work with smaller companies. He explained market capitalization, which is the share price multiplied by the number of shares outstanding. Definitions of “small cap” vary, and a smaller public company can still be a substantial business.

His example was a specialist supplying protective drapes used with robotic surgical equipment. It illustrated how a company can serve an important, focused market without being a household name.

Smaller companies may have room to grow, but they can also face greater financing pressure, volatility, and trading liquidity risk. A good product is the beginning of the research, not the entire investment case.

What I want you to take away

I left the evening encouraged by the opportunities we discussed and appreciative of Roby’s ability to explain them clearly. We also have real risks to monitor, including interest rates and inflation. Optimism and careful planning belong together.

For us, the work continues to be connecting the investment decisions to your life: the income you need, when you need it, the taxes you may owe, and the flexibility you want in retirement.

If something here raises a question about your own plan, please reply to this email or contact our office. Darren and I would be happy to discuss it with you.

If a friend or colleague would find this discussion helpful, please feel free to share this Blatt Watch. If they are approaching retirement or looking for help coordinating their financial decisions, we would welcome an introduction.

Roby Fatta, First Trust, October 2026 Outlook, presented October 15, 2026; event fireside chat with Peter Blatt. Earnings data: Capital IQ through September 30, 2026. Data center spending forecast: Bloomberg Intelligence, June 2026. Other chart dates appear in the presentation.

SEC Investor Bulletin on bond prices and interest rates

Federal Reserve research on inflation’s supply and demand drivers

Meta’s update on its Richland Parish data center

This commentary is for educational purposes and is not individualized investment, tax, or legal advice. Views reflect the October 15 discussion and may change. Forecasts may not be achieved. All investments involve risk, including loss of principal. Past performance does not guarantee future results. Diversification does not ensure a profit or protect against loss. Indexes are unmanaged and cannot be invested in directly. References to companies illustrate discussion topics and are not recommendations to buy or sell securities.