Looking Beyond the Headlines in U.S. Equities: Insights from Denise Chisholm - October 08, 2026

Reading the latest Fed minutes

The minutes from the Federal Reserve's September meeting suggested the possibility of another rate increase before year-end. However, Denise noted that recent revisions to the personal consumption expenditures (PCE) deflator, the Fed's preferred measure of inflation, may have altered the inflation picture more than many investors appreciate. According to her analysis, changes to just two categories that had been driving much of the inflation data reduced the above-average nature of the PCE deflator from the 68th percentile to the 63rd percentile historically. On a three-month run-rate basis, she noted that core PCE is now closer to 2%. That does not necessarily mean additional tightening is off the table. In her view, any further rate increase would likely be more about adjusting policy levels than responding to accelerating growth or inflation. Relative to still-elevated nominal gross domestic product (GDP) growth, policy rates remain somewhat low. Historically, she noted, similar environments have generally been constructive for markets.

Looking beyond narrow market leadership

One of the market's most widely discussed concerns has been the concentration of returns among a relatively small number of companies. Denise argued that the issue may not be as troubling as headline statistics suggest. While the S&P 500 appears narrow by certain measures, a broader look at market participation tells a different story. Measures based on the Russell 3000 or longer-term indicators such as the 200-day moving average suggest a market that looks less unusually concentrated. To explore the issue further, Denise and Fidelity's technical research team examined roughly a century of daily market data. Their analysis identified two competing interpretations. One suggests that weak participation reflects a hidden correction beneath the surface of the market, creating a potentially attractive buying opportunity. The other argues that weak participation eventually drags the broader market lower. The historical evidence she cited has generally supported the first interpretation. Periods of low participation have historically produced stronger average returns over the following year than periods of high participation. When periods such as the Great Depression and the global financial crisis are excluded, the pattern becomes even more pronounced. In her view, what appears to be a market concern on the surface has often coincided with more constructive outcomes than investors might expect.

A rare set-up worth watching

The current backdrop is unusual for another reason. Denise highlighted the combination of extremely low participation and a market that has not experienced a meaningful correction. The percentage of stocks trading above their 50-day moving average currently sits near the bottom decile of historical observations, yet the broader index has not declined by even 5%. According to the research she referenced, that combination has occurred only about 3% of the time over the past century. Historically, she noted, markets have at times acted as leading indicators. When stocks demonstrate resilience despite weak participation, they may be signaling a stronger underlying backdrop than other indicators suggest. Periods that entered this type of environment from a position of relative strength were often followed by additional market strength.

Where technology fits

Against that backdrop, Denise continues to see attractive opportunities in U.S. technology. She identified the sector as one of the more compelling risk-reward opportunities across both U.S. and global equities. In her view, valuations already reflect many of the concerns investors continue to raise, including slowing capital expenditures and questions about whether spending on artificial intelligence will ultimately generate sufficient returns. When concerns become widely discussed and repeatedly debated, she noted, there is a greater likelihood that markets have already incorporated those risks. She also argued that narrow leadership becomes less concerning when the broader market continues to advance. Emerging markets have participated in the rally and even China, which has lagged other major markets, has delivered positive price performance. Historical context is also important. Denise noted that the two best-performing sectors in a given market cycle have often outperformed by between 1,000 and 2,000 basis points. Despite technology's prominent role in recent market performance, its margin of outperformance has remained below that historical range.

Opportunities beyond technology

While technology remains attractive in her view, Denise also highlighted opportunities elsewhere in the market. Metals and mining stood out, although for reasons very different from those supporting technology. In steel, and to a lesser extent copper and gold, companies have already increased capital spending and are now pulling back. Steel margins currently sit in the bottom quartile historically, creating what she views as a classic bottom-of-cycle setup. She emphasized that this is primarily a cyclical opportunity rather than an inflation-driven investment thesis. Within industrials, she pointed to areas such as machinery and transportation. Earnings growth, combined with greater capital spending discipline, may support free cash flow generation and profit margins. She also highlighted rate-sensitive segments of the market. Housing within consumer discretionary and regional banks looked interesting because current valuations may help limit downside risk over a one-year horizon while offering potential upside if rates do not move materially higher. At the other end of the spectrum, utilities and consumer staples remained among her least-favored sectors. She also expressed a cautious view on energy, arguing that higher-for-longer oil prices may already be reflected in market expectations, while U.S. production has recovered meaningfully from prior lows.

On rates, sovereign debt and commodities

Beyond equities, Denise also addressed developments in fixed income and commodities. She suggested that rising long-term bond yields have effectively done some of the Federal Reserve's work. For much of the past two years, 10-year Treasury yields sat well below levels implied by nominal economic growth. Viewed through that lens, the recent move higher may represent a normalization process rather than a major market shock. She also noted that 10-year yields have largely traded within a broad range over that period. Turning to sovereign debt, she identified France as a notable outlier within Europe because of rising public and overall debt levels. However, she emphasized that debt in isolation is not necessarily problematic.

Instead, the combination of rising debt and weak economic growth tends to be more concerning. Denise contrasted France's relatively modest growth rate with stronger growth in the United States, arguing that the two situations are fundamentally different. In commodities, she described the current environment as a secular bull market but suggested that a significant portion of the repricing may already have occurred. Based on historical patterns, she estimated that the cycle may be approximately halfway complete.

Conclusion: Historical signals that warrant attention