What's Next For Markets Sep 20, 2026
With Michael Kantrowitz, Chief Investment Strategist at Piper Sandler
The S&P 500 trades at just over 19 times forward earnings, one of the lowest multiples in several years. Michael Kantrowitz says that is not a buy signal.
The line he keeps hearing on television is that stocks are cheaper than they have been in five years. His answer is that the market repriced because the inputs got worse: oil near $100, two more rate rises priced in, and a Federal Reserve that has already delivered one.
"So things that get cheaper sometimes are cheaper for valid or right reasons."
Michael Kantrowitz, Chief Investment Strategist at Piper Sandler, leads the firm's portfolio strategy team, and recorded this after a week of client meetings in Kansas City, Austin and Dallas, where rates, oil and the AI build-out were what clients wanted to talk about.
The full episode is covered here so you can skip it.
Here are the 7 takeaways that matter.
Key Takeaways
The rest of the year is a multiple story, not an earnings story, with his 2027 estimate at $420 and the market already within about 1% of it
A cheaper market is not a more attractive one, because the inputs that justified 23 times earnings last year are gone
Oil was below $60 and the 10-year near 4% then; now oil is at $100 with rate rises priced in
Falling free cash flow at the hyperscalers explains the Mag 7 de-rating, with those multiples down about 20%
Oil is the biggest single determinant of the multiple, and he will not put a number on where it ends the year
The arithmetic is simple and the answer is not: 20 times earnings gets the S&P 500 to 8,400, 18 times gets a flat-to-down market
He is rotating toward profitability and earnings momentum for a slowing 2027, without forecasting a recession
Changing a year-end target in October makes no sense to him, when every other analyst works on a 12-month rolling target
1. The Barbecue Tour
The episode opens with the trip the two had just finished, through Kansas City, Austin and Dallas, seeing clients. The barbecue got reviewed first.
At Jack Stack in Kansas City, the thing that beat expectations was not the obvious order.
The best plate on the trip was the one he did not expect
Biggest upside surprise, the smoked chicken wings.
Michael Kantrowitz
Pressed to rank cities, he took the side that would annoy Texas and then gave Texas its due.
Kansas City for ribs, Texas for brisket
I think Kansas City's got better ribs. Texas has brisket.
Michael Kantrowitz
His Dallas pick was Terry Black's against the host's Pecan Lodge, and Joe's in Kansas City, the one attached to a gas station, came up as well. The running joke arrived as a setup with no payoff: asked about the worst brisket he had ever eaten, he answered, "It was amazing."
The trip matters for the rest of the episode because it is where the client conversations happened. The host's summary of what came up was AI, where this week's fears were about the technology killing people rather than jobs, and the Federal Reserve raising rates, the first increase of Kevin Warsh's tenure.
2. Earnings Are Not It
The host's setup was that other strategists have spent the last two weeks revising year-end targets, which he finds odd this late in the year, given that everyone covering individual stocks works on a rolling 12-month view instead.
Kantrowitz's answer was that the target debate is being held over the wrong variable.
Earnings are strong and are not where the surprise comes from
Earnings are fantastic. I think they're going to stay very strong in Q3, particularly around the AI buildout.
Michael Kantrowitz
The exception he named is the consumer, where oil prices have already fed into estimates and staples have seen downward revisions, though it is a small part of the index. Expectations around the AI build-out are already high, and the visibility runs into 2027, which is why he does not expect the estimate to move much.
His own 2027 number is already almost here
We've been penciling in $420. So, we're only $4 away from there, about 1%.
Michael Kantrowitz
Which leaves one variable to explain the rest of the year
which means that the multiple of the market is really what's going to dominate how we end the year. And I would say what's largely driving the multiple is interest rates and oil prices right now.
Michael Kantrowitz
The host made the same point from the other direction: on earnings alone the index would be up more than 30% this year, and multiple contraction is the difference between that and the return investors actually have.
3. Cheap for a Reason
Kantrowitz then spent the longest stretch of the episode on a distinction he says gets collapsed constantly.
The market is measurably cheaper, and that is a fact about price
So now the forward PE is down to one of the lowest levels we've seen in several years. We're at about just over 19 times forward earnings and the market's gotten cheaper.
Michael Kantrowitz
Every other valuation metric has come down too, including the cyclically adjusted measure he called the Case-Shiller number. His objection is what people infer from that.
The analogy he reached for was the food the episode opened on.
Day-old barbecue is cheaper, and nobody thinks it is a better deal
Let's say there was a barbecue place that sold day old barbecue just for this story. You would have of course never expect to pay full price.
Michael Kantrowitz
He extended it to the manager's-special sticker in a grocery store: half price, and the reason is printed on the label as a best-before date.
Cheap is usually an answer, not an opportunity
So things that get cheaper sometimes are cheaper for valid or right reasons.
Michael Kantrowitz
The comparison that makes it concrete is the market a year ago.
What 23 times earnings was paying for
We were trading at 23 times earnings late last year when oil was below 60. The 10-year was near 4%.
Michael Kantrowitz
Against that, the market had expected a couple of rate cuts this year. What it has instead is oil at $100, additional hikes priced in, and a list of worries about AI, the economy and the fiscal position that barely existed in January. All of that, he said, warrants a lower multiple.
The television version of the argument annoys him
So, while you may hear people go up on CNBC and say the market's now cheaper than the last 5 years, it's cheaper for a reason and that doesn't mean stocks are more attractively valued.
Michael Kantrowitz
4. What Compressed It
He named two sources of the compression. The first, and in his view the larger, is the rise in oil, the rise in interest rates, and the effect both have had on Fed policy, which has produced one rate rise so far.
The second started earlier and is specific to the largest companies in the index: the expected free cash flow of the hyperscalers has been coming down.
Falling cash flow expectations explain the Mag 7's de-rating on their own
that number has been falling pretty sharply for the Mag 7, and does a really good job on its own explaining why the multiples of the Mag 7, which are down about 20%, much more in the market are down.
Michael Kantrowitz
He does not expect either half of that to reverse in the next few months. Hyperscaler capital spending is unlikely to change materially, so the re-rating that would follow a change is not on the table.
5. Oil Is the Swing Factor
Which leaves oil, interest rates and Fed expectations, and Kantrowitz treats the three as one variable. The trouble is that the first one is a war story rather than a macro model.
Everyone has expected an off-ramp for longer than the off-ramp has taken
Perhaps Trump reaches into that hat and finds some rabbits, finds some way out of this. But it's hard to have a high conviction view on that right now.
Michael Kantrowitz
The November election is the date he flagged as a reason a resolution might be pursued. What he would not do is put a number on the price.
He names the driver and declines to forecast it
So, we can say with confidence the price of oil, I think, is going to be the biggest determinant of market multiples, but I admittedly can't say I have a lot of confidence that we're going to be at $80 or $120 by year end.
Michael Kantrowitz
6. The Math to Year-End
He then did the arithmetic out loud, holding the earnings estimate at $420 and varying only the multiple.
Twenty times earnings, and the index has room
You multiply that times a PE of 20 and you're at an S&P 500 level of $8,400.
Michael Kantrowitz
At the current 19 times, the same estimate lands just below 8,000. One turn lower is the case that changes the year.
Eighteen times, with oil and rates still rising, is a down market
If we fall to a multiple of 18 times earnings and we do see oil prices or interest rates continue to press higher, you're looking at a market that's flat to down from where we are today, or most likely down.
Michael Kantrowitz
His own summary of the position is that there is no edge to be had in the macro backdrop, because the swing factor is not something a model produces: multiples decide the year, and rates and oil decide the multiples.
7. Rotate Into Profits
The last section is the recommendation, and it follows from where the cycle sits rather than from a forecast. The broadening story is more than a year old, expectations have risen across the economy, the index and the AI outlook, and, in his words, "we're getting closer to the peak than we are to the trough."
The advice he has given clients for six weeks
we think it's been time and it will continue to be time to increase positions in the portfolio that are more likely to perform in a slowing environment in 2027, from admittedly very strong levels.
Michael Kantrowitz
He was careful about what that is not. It is not a recession call: "So not worried about a recession or anything like that." The starting point, he stressed, is a strong one.
What to stop buying, and what to buy instead
probably doesn't mean you want to keep chasing the super high beta names in the market even if they're AI-related, but add exposure to companies with more profitability and earnings momentum
Michael Kantrowitz
Cheaper versions of those companies are the sweet spot, he said, and that is what the firm's macro select portfolios currently show clients. The host's paraphrase was stable earnings and profitable companies that deliver regardless of index volatility, which Kantrowitz accepted.
Bonus Insights
Next week's subject is already set
He closed by proposing a breakdown of how much of the earnings improvement comes from the AI build-out itself, meaning the companies selling into data-center construction, against companies adopting AI and showing revenue gains, efficiency gains or a new product mix because of it.
The year-end target convention
The host's aside is a real criticism of the sell side: a target set for 31 December, revised in October, tells a client almost nothing, while the analysts covering individual companies all work on a rolling 12-month horizon.
Why the consumer sector is the one seeing cuts
Oil prices reach household budgets before they reach anything else, which is why staples carry the downward revisions in an otherwise strong earnings season.
Kantrowitz's bottom line is that the last quarter of the year will be decided by the oil price and the bond market rather than by company results, and that an investor who reads a lower multiple as a discount is buying the market at the moment its inputs stopped justifying the old price.
Products, Companies & Tools Mentioned
Piper Sandler (Kantrowitz's firm, where he leads the portfolio strategy team; its macro select portfolios carry the profitability and earnings-momentum names he recommends)
CNBC (Where he says the "cheaper than the last 5 years" argument keeps getting made without the reason attached)
Whole Foods (His manager's-special example: the discount and the best-before date are printed on the same sticker)
Jack Stack Barbecue and Joe's Kansas City Bar-B-Que (The Kansas City stops on the client trip; the smoked chicken wings were the upside surprise)
Terry Black's Barbecue and Pecan Lodge (The Dallas picks, his and the host's respectively)
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