Every parabola has a vertex

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Cougar Global Investments

Every parabola has a vertex

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The past few years have delivered a tremendous run for the S&P 500 Index, which has risen from below 4000 at the beginning of 2023 to above 7000 in mid-2026. The 10-year annualized return for the S&P 500 was close to 15%, as of the end of May, effectively double the long-term average. It’s a strong analog to the late 1990s, the only other time investors have enjoyed such a sustained run in domestic large-cap equities.

So, what should investors do now? In terms of total approach, we favor reallocating technology gains to other areas of the market, primarily staying within the United States, and using US Treasuries as portfolio ballast. Artificial intelligence capital expenditures (AI capex) and the sustainability of business investment will undoubtedly be important as we head into 2027. However, recent market action suggests investors have largely accounted for a more elongated computer memory cycle, and areas of speculative excess remain.

At this point, we believe investors should consider balancing their technology exposure with other corners of the real economy, such as energy-related infrastructure or metals and mining. We also would lean portfolio allocations toward the US, despite persistent valuation concerns, since the US is highly exposed to the secular artificial intelligence theme. Additionally, the US is better positioned with ongoing fiscal support and a greater ability to weather structurally higher energy prices than less-wealthy regions overseas. Finally, US Treasuries offer reasonable starting yields, while tight credit spreads are generally less appealing for most passive investors. Overall, think about staying invested, booking some gains, and remembering that parabolas are exciting only half the time.

Key takeaways

Consider a more balanced asset allocation — AI capex remains the story, but the parabolic ride higher in certain speculative areas draws clear comparisons to the technology bubble in 2000.
S&P 500 earnings continue to deliver, with six consecutive quarters (and counting) of double-digit earnings growth.
For index investors, use Treasuries as an equity counterweight and leave individual credit selection to skilled bond managers.

S&P 500 Index, Price Return, 10-Year Annualized

Source: Macrobond, as of 5/29/2026.

Risk Information:

Investing involves risk, including risk of loss.

Diversification does not ensure a profit or guarantee against loss.

Disclosures

There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized.

Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce return.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.

Many investors consider bonds to be “risk free” investment vehicles. Historically, bonds have indeed provided less volatility and less risk of loss of capital than has equity investing. However, there are many factors that may affect the risk and return profile of a fixed-income portfolio. The two most prominent factors are interest-rate movements and the creditworthiness of the bond issuer. Bonds issued by the U.S. government have significantly less risk of default than those issued by corporations and municipalities. However, the overall return on government bonds tends to be less than these other types of fixed-income securities. Investors should pay careful attention to the types of fixed-income securities that comprise their portfolio and remember that, as with all investments, there is the risk of the loss of capital.

The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.

Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.

Indices

S&P 500 Index — Measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.

About Cougar Global Investments

Cougar Global Investments is a globally oriented macro asset-class portfolio manager that uses a disciplined portfolio-construction methodology combining macroeconomic analysis with downside-risk management. Cougar Global’s guiding belief is that the goal of investing is to generate consistent compound growth, primarily achieved by seeking to minimize loss.