Read this week's Major Trend, 

September brought narrowing market breadth, rising interest rates, and sharp performance dispersion as a handful of AI-related mega caps dominated market leadership. While Core and Select Industries declined, both held up relatively well against broader market weakness. Meanwhile, Grizzly capitalized on the selloff, gaining 7.93% for the month. Read our September portfolio update for insights into performance, positioning, and the market forces driving results.

In the third quarter of 2026, Growth was the sole outperforming style, and even then, it was a measly 1.1% spread. The other nine factors trailed the S&P 500.

Read this week's update.

Leuthold Select Industries portfolio is targeting exposure to both AI winners and AI losers, with the GS Scores capturing the best themes on both sides. Other prominent segments among the Attractive zone include defensive groups. Alternatively, Consumer Discretionary groups look vulnerable.

History says REITs will be beneficiaries when rates ultimately turn, so we’re doing our homework early. When buying REITs for a falling-rate environment, are you buying a monolith—or do the underlying sectors behave substantially differently in that it matters which ones you own? It matters. Quite a bit.

Read this week's Major Trend.

For decades, we’ve tracked an indicator that maps bond market conditions to equity performance: the Dow Bond Oscillator—and its track record is exceptional. Despite the S&P 500’s perpetual run to new highs in 2026, the DBO has been on a persistent sell signal.

Despite the official consensus that leveraged ETFs are strictly for short-term trading, a recent academic paper by Carpenter, Lu, and Whitelaw argues the opposite. Their study contends these funds can actually serve as a superior long-term wealth strategy for certain retirement savers.

Cheap, increasingly capable AI may undercut the revenues needed to justify massive infrastructure spending. AI might be the largest capital spending boom in American history, but it can’t escape the economic laws of competitive markets, and it’s awfully hard to compete against “free.”

Some sentiment measures reliably correlate (usually contrarily) with forward returns. Others are valuable as regime indicators and gauges of market fragility. The message from leveraged ETF flows is split, with one foot in each camp. Overall, these signals suggest investors may be getting skittish.

The rise in the 10-year nominal rate is almost entirely due to the upswing in real rates—not a jump in inflation expectations. This has put pressure on “real asset classes,” like gold, commodities, real estate, and TIPS. But when real rates retreat, these assets can rebound quickly.

Potential downside to median levels for the cap-weighted S&P 500 narrowed a tick or two as growing fundamentals had a month to eat into multiples

The surge in global bond yields has shifted market sentiment rapidly toward the cautious end of the risk spectrum.

Evidence suggests a favorable post-midterm setting for stocks, particularly with a Republican President/Democratic Congress. 2026 is clearly not a textbook midterm cycle, and long-term bond yields (not the election result), are the key driver of all markets.

Overall, our historical study shows that the onset of a tightening cycle isn’t too concerning. Yet, the more aggressive the hikes and the longer the hiking period, the more likely monetary policy becomes too tight.

As rates jumped in September, the S&P 500 showed remarkable resilience, closing the month flat. That fortitude ended at the index level. The average large-cap stock dropped 5%, matching mid- and small-cap losses in the worst month for market breadth in recent memory. Together, it drove equal-weight/cap-weight relative strength through its October 2025 trough to a new 23-year low.

The Russell 2000 and S&P 400 lagged the S&P 500 by almost 10% in Q3. The SMID complex’s outperformance enjoyed in the first half of 2026 is no more.

This reading is a few clicks wider than the past two months, as Small Caps have generally lagged Large Caps since the end of June. However, the best proxies for both sides of our Ratio of Ratios had an awful September; the S&P 600 lost 6%, and the equal-weighted S&P 500 was down 5%. 

The Up/Down ratio for the final month of Q2 reporting is 1.93, which lands in the top 5% of our dataset. Although a comparison to the highest figure in this vignette’s 43-year history seems unfair, the current reading has retreated from Q1’s “three-month” ratio of 2.21.