Stock prices have drifted slightly lower over the last month. The S&P 500 is down about 2% over the last month while the Nasdaq has fallen 1%.
The chart below shows the price change of the Nasdaq and the S&P 500 since the beginning of the year.
Stocks fell in the first three months of the year due to the Iran war. Prices then rose sharply in April and May with the Nasdaq gaining 25% and the S&P increasing 17%. Since the beginning of June, prices have been holding steady.
For the year, stock market returns have been good – the Nasdaq is up 14% and the S&P is up 11.6% for the year.
Currently, we are in a very strange time for the stock market.
There are lots of very positive signs and lots of very negative signs for stocks.
The economy remains quite strong. GDP growth is accelerating – driven heavily by AI spending. Unemployment remains low and is holding steady.
Corporate profits are growing at a record pace and profit growth drives stock prices. Earnings for the S&P 500 companies grew by 12% in 2025 – well above the long-term average of roughly 8%. Excluding the Mag 7 companies, earnings grew by 9% in 2025 – closer to the norm.
Profit growth has been exceptional in 2026. S&P 500 earnings are expected to increase by 29% in 2026. The big tech companies are driving a lot of this growth, but the median growth rate is expected to be 14% for all of the S&P 500 companies.
AI stocks and related technology stocks have posted huge increases for the year. Semiconductor stocks are up 50% for the year, and AI index funds are up over 30% for the year. AI bubble concerns still exist but sales and earnings growth for tech companies has showed no signs of letting up.
Inflation, interest rates and the war in the Middle East are the big problems right now for stocks.
Oil is back up to over $100 a barrel after it had fallen to $72 in July. The war is escalating and expanding with no end in sight.
Because of the war and its impact on prices for all goods, the Fed increased interest rates this week by one quarter of a percent.
It is difficult to see a way out of the conflict in the Middle East at present.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
Even the most conscientious and organized people miss some important things when they are at or near retirement.
The investment services industry is to blame. The industry has done a poor job of educating people about all the steps that retirees need to take to ensure that they maximize their money in retirement.
Here are some of the flaws in the conventional wisdom about retirement finances.
Too much focus on THE NUMBER – People have been led to believe that a successful retirement is all about building a specific dollar amount for their retirement nest egg by age 65. Income generated from your retirement investments is the only thing that matters – not the number.
Bad financial forecasts – The typical financial plan developed by your investment advisor assumes a 6% annual return on your investments based on the traditional 60/40 stocks and bonds portfolio. Most of the time, the 6% growth assumption is used regardless of the actual investment strategy. A 6% return is not good, and you should not accept these mediocre results. A monkey can generate 6% per year. Being conservative is wise but low expectations should not be the goal.
The 4% Rule – Conventional wisdom says that people should draw 4% each year from their retirement funds – another conservative assumption. Taking out too much money early in your retirement years can get people into trouble, but being too conservative with the withdrawal plan doesn’t connect spending to reality.
More bonds – Standard industry advice says that retirees should move out of stocks and into bonds to reduce the risk of loss. Bonds are less risky than stocks, but bonds generate much lower returns than stocks. Bonds also are not risk free – they can and do lose money. Below is the price chart of one of the best intermediate term bond funds from PIMCO over the last five years. Bond prices dropped by 23% from late 2021 to 2023 and, as of now, prices are still 17% below their 2021 level. To make matters worse, the yield on these bonds was 1.5% in 2021. People investing in bonds in 2021 earning only 1.5% probably didn’t realize that they were exposed to 20% losses. The risk/reward ratio for bonds is not good.
The asset allocation strategy – Standard industry advice puts most retirees in plain vanilla asset allocation portfolios so that they are diversified and carry lower risk. Industry professionals tell people that they should own bonds and a variety of stock investments including US large cap stocks, small cap stocks, and international stocks. Average annual returns from bonds are around 2% over the last 20 years. US large cap stock funds produced 12% annual returns while small cap funds gained 9% and international stocks posted 7% annual returns. Small cap stocks and international stocks also carry more risk than the best US large cap funds. These cookie cutter portfolios don’t reduce risk, but they do reduce your gains.
Buy & Hold & Suffer – The stock market crashes every six or seven years. The industry tells you that the only option is to “hold on” and “wait it out”. The stock market will eventually recover but it can take 5 years or more to get back to even. It doesn’t make any sense to watch your $1 million account drop by 40% in a matter of months. There are better ways to deal with stock market volatility.
Risk is not understood – The industry highlights investing risks, but they do a poor job of explaining it and quantifying it. Aggressive investors who only invest in stocks, carry a risk of 40% to 50% short-term losses in a market meltdown. Asset allocation investors (stocks and bonds) are told that they have lower risk, but most don’t understand that they could lose 30% in a market downturn.
You Need an Advisor – People believe that investing is too hard and that they need to hire a financial advisor. Some people have no clue about investing and have no interest and an advisor is the only option for these people. A simple target date fund can match the 6% to 7% returns that your advisor projects for you and it costs you nothing. You will pay an advisor hundreds of thousands of dollars during your retirement. If they were great investors earning you 12% per year and protecting against big losses, those fees would be well worth it. But paying that money for cookie-cutter investment strategies that don’t protect your money in downturns is not a good deal.
YOU CAN DO MUCH BETTER
It is possible to avoid these pitfalls of retirement investing. It is not difficult. You can create much more income in retirement and reduce your risk of loss.
You also don’t have to send your life savings to some advisor you don’t even know. You can maintain control over your money.
There are three simple steps you need to take to improve your retirement finances.
A better and more comprehensive retirement plan and forecast – Most people don’t really know where they stand in retirement. It is painless and quick to develop a better retirement plan.
A better investment strategy – This is another painless and quick step to create the retirement of your dreams.
A better process – With a better plan and a better investment strategy in place, the last step is to create a process to monitor and manage the strategy going forward.
To help you get started quickly on a better path, I am offering a free retirement planning process where we will cover all three of these steps. Click the link below to get on my calendar now to begin the process. It is totally free – no obligations or commitments.
If you decide to use my training services going forward, you will not incur advisor fees of tens of thousands of dollars per year. The cost to work with me on an ongoing basis is less than the cost of a gym membership.
You will get better results by having an investing expert (fund manager, author and blogger) at your side. I have helped hundreds of people with their retirement investing and planning.
I can start helping you right away. The fixes are not that difficult. You will start to see the benefits very quickly. Click the link below to set up an appointment to get started.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
Despite the recent uptick in stock prices, the trend in interest rates is concerning.
The 10-year Treasury yield touched 4.747%, right around its highest level in the last 20 years. The 10-year reached 4.9% in 2023 and 5.0% before the Great Financial Crisis in 2007. The 30-year reached 5.274%, a 19-year high last seen in July 2007.
The Treasury market sets part of the price of almost everything you own. It influences mortgage rates, corporate borrowing costs, bond prices, and the rate investors use to value future corporate profits.
When yields rise, existing bond prices fall. Borrowing becomes more expensive. And the distant profits supporting expensive growth stocks become less valuable today.
The bond market has two things weighing on it right now. The first is domestic: investors are questioning whether the Federal Reserve is doing enough to control inflation. The second comes from abroad: Japan's effort to defend the yen may require it to mobilize part of the world's largest foreign Treasury position. We don't yet know how many Treasuries Japan actually sold — but its intervention landed at exactly the moment the U.S. bond market was already losing patience.
The Treasury market sets part of the price of almost everything you own. It influences mortgage rates, corporate borrowing costs, bond prices, and the rate investors use to value future corporate profits.
Why 5% Matters to Your Portfolio
The 10-year Treasury yield is one of the market's most important hurdle rates — the return threshold every other investment gets measured against. It shapes mortgage rates, corporate borrowing costs, and the rate investors use to discount future corporate profits back into today's dollars.
When the 10-year rises, three things happen at once: existing bond prices fall, financing gets more expensive across the economy, and every distant dollar of expected corporate profit becomes less valuable today. That last point matters most for expensive growth stocks — a large share of their value depends on profits investors expect years from now, and the higher the discount rate, the less those future profits are worth in present dollars.
A 5% 10-year rate is not a guarantee of future economic problems, but it puts pressure on all financial markets. At a 5% Treasury yield, investors can earn a meaningful return without accepting corporate earnings risk at all. That forces expensive stocks to offer a more convincing growth story — or a lower price. Government bonds compete more aggressively with stocks for investor dollars, housing affordability deteriorates further, and high-multiple companies have much less room to disappoint.
The historical parallel is useful if held carefully: the 10-year also touched 5% in October 2023, when the S&P 500 was near a five-month low, and stocks rallied hard once yields retreated. That was a correlation with several contributing causes, not proof that 5.00% exactly is some mechanical trigger for a selloff — but it's the same test the market is running again.
The Bond Market Was Already Revolting
The more important cause of Friday's Treasury selloff was domestic, not Japanese. The Fed held rates steady this week despite three officials preferring a quarter-point increase. In response, short-term yields fell while long-term yields rose. In this case, the front end of the yield curve was pricing less additional Fed tightening, while the long end demanded more compensation for the inflation risk of holding debt for decades.
In plain English, the market was saying: the Fed may not raise short-term rates enough, so investors want more compensation for holding long-term bonds exposed to inflation. That's a credibility warning. Japan didn't create it. Japan may have simply arrived at exactly the wrong moment.
The Bond Investor's Case Against a Silent Fed
A bond vigilante is an investor who sells government bonds because they believe fiscal or monetary policy is too loose. That selling pushes yields higher, tightening financial conditions even when the central bank does nothing. The vigilantes don't literally set the Fed's policy rate. They can set the borrowing rate the rest of the economy actually feels.
Fed Chair Kevin Warsh has largely abandoned the forward-guidance crutch — the hints about the Fed's next move that prior chairs leaned on. Three voting officials — Cleveland's Beth Hammack, Dallas's Lorie Logan, and Minneapolis's Neel Kashkari — wanted a quarter-point hike. The Fed held anyway, 9-3, keeping the target range at 3.5%-3.75% for a fifth consecutive meeting. The long end sold off anyway.
The inflation backdrop makes the hold harder to defend.
Japan's Currency Defense
Japan is the largest foreign holder of U.S. Treasury securities specifically, at roughly $1.14 trillion as of the latest available monthly data — its broader foreign-exchange reserves are larger, with Treasuries making up a substantial share. Japan does not necessarily need to dump Treasuries to obtain dollars: it can draw down dollar cash, sell other dollar assets, or borrow dollars against Treasury collateral through a Federal Reserve facility built for foreign central banks, which lets it raise dollars without selling a single bond.
That means we don't actually know how much long-duration Treasury paper, if any, Japan sold outright Friday. It's a potential source of pressure on the world's largest bond market — not a confirmed cause of last week's selloff.
The honest conclusion is that the U.S. bond market was already questioning the Fed. Japan may have just added to the pressure.
What This Means for Stocks
Growth stocks rebounded on Friday and Monday, but higher bond prices will put downward pressure on tech stocks in particular. If rates pause at these levels and then turn lower, that would be a good thing.
When inflation and interest rates rose in 2021 due to Covid driven inflation, growth stocks began falling in November of 2021, preceding the bear market of 2022. The S&P 500 declined 25% in 2022 and the Nasdaq (tech) fell by 34%.
Oil prices are not making much sense now, but the recent decline back to $80 per barrel is good for stocks and inflation.
These recent moves illustrate why I am not a believer in bonds as an investment. In 2026, bond prices have declined between 3% and 8% depending upon the duration. The risk of loss combined with low rates of return is not a good tradeoff.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
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