Today’s IPO Market vs. the Dot-Com Bubble

The Fisher Investments team conducts a comprehensive capital markets update covering multiple investment themes. On IPOs, they distinguish today's market from the dot-com bubble by noting that current IPO candidates like SpaceX, Anthropic, and OpenAI have substantial, growing businesses with Fortune 500 customers and millions of users, unlike bubble-era companies with minimal revenue. They emphasize that elevated IPO activity is a sentiment indicator rather than an immediate investment signal, as historical data shows average IPOs underperform the market 70% of the time over 24 months with median returns of -35.1%. The team observes that despite increased IPO activity, some skepticism remains (evidenced by July's AI stock pullback and OpenAI's cautious IPO process), suggesting the market hasn't fully embraced euphoria.

On politics, the discussion centers on the "Midterm Miracle," a historical pattern where the fourth quarter of midterm years and the subsequent two quarters see the most positive stock market performance in history—positive 88% of the time over the past century. This occurs because post-midterm gridlock reduces political risk aversion. With the 2022 midterms approaching, current polling suggests Democrats could take the House and possibly the Senate, though campaigns haven't fully mobilized. Republicans have fundraising advantages and redistricting benefits, but President Trump's 39% favorable rating creates headwinds for GOP candidates in close races. Regardless of outcomes, gridlock effects should benefit markets as senators elected in 2024 will outlast the current president and gain independence.

On inflation and interest rates, the team maintains their view that rates will remain rangebound despite oil price spikes. They argue that broad-based inflation requires significant money supply growth (like 2021-2022), not individual commodity shocks. With bond yields at the high end of their expected range, they've extended portfolio duration to benefit from potential rate moderation as inflation concerns fade. They remain underweight corporate bonds due to low credit spreads, preferring high-quality fixed income that serves its portfolio function as a volatility moderator rather than income generator.

Regarding the Federal Reserve, Ken Fisher notes that Fed chairs typically become influenced by their staff of 300+ Ph.D. economists over time, becoming "Fed heads" focused on institutional dynamics rather than sound policy. He expresses skepticism about predicting central bank actions but notes that new Chair Warsh is taking encouraging steps (like considering eliminating the dot plot) to acknowledge forecasting limitations. The team sees no compelling reason for the Fed to raise rates given economic conditions.

On corporate earnings and global growth, the analysis highlights that earnings growth expectations for 2026 exceed 20%, driven broadly across Energy, Technology, Financials, and Industrials—not just tech. Global manufacturing PMI is high and rising, with trade accelerating outside the U.S. as countries respond to tariff discussions by trading with each other. Companies have demonstrated remarkable resilience through COVID, inflation, interest rate hikes, tariffs, and geopolitical disruption, with P/E ratios actually declining despite all-time market highs because earnings growth has outpaced multiple expansion.

On risks, the team identifies both external factors (China, the dollar, AI regulation) and intrinsic behavioral risks. They warn that as optimism builds, investors may abandon discipline through "fear of missing out," remembering historical examples like neighbors' investment choices. The greatest current risk is people adopting multi-year time horizons for stocks (believing in a $5-10 trillion future valuation) while forgetting that market cycles will create 50% drawdowns in the interim, potentially shifting their behavior during bear markets.