A pension fund or an insurer that has to earn about 7% a year can now buy Treasuries at 5% and find the remaining 2% in the stock market. For most of the past fifteen years it had to find all 7% there.
That reversal is the reason money is moving into bonds faster than into equities, and Lance Roberts, who manages portfolios at RIA Advisors, thinks almost nobody has worked through what it does to share prices.
"The Fed cannot attack inflation directly. They have no tool for that."
Roberts is Chief Investment Strategist at RIA Advisors, writes the firm's weekly newsletter, and came to this recap with five of his own charts, including one plotting the interest expense of the S&P 500 against the 10-year Treasury yield.
The full interview is covered here so you can skip it. 80 minutes of audio, 20 minutes of reading.
Here are the 13 takeaways that matter.
👤 Guest: Lance Roberts, Chief Investment Strategist at RIA Advisors and lead editor of its weekly newsletter
🎙️ Host: Adam Taggart, founder of Thoughtful Money, who runs its weekly market recap with Roberts
📰 Published: 19 September 2026 on YouTube (Adam Taggart | Thoughtful Money)
🔴 YouTube | 🔗 Episode page | ⏱️ 1 hr 20 min | ✅ Time saved: 1 hr
Key Takeaways
A pension fund needing 7% a year can now get 5% from Treasuries and only 2% from stocks
Roberts says the actual economic data gave the Fed no support for a rate hike
He puts fair value on the 10-year near 4.6%, against a yield close to 5%
Higher rates have not hit equities because corporate interest coverage is near a record, and the average company still pays about 2.25%
Corporate debt is repricing a few hundred billion dollars at a time, not all at once
Earnings sit two standard deviations above their trend line back to 1935, and he expects a reversion
He says the next secular bear market is coming, possibly in the 2030s, and that equities go sideways rather than to zero
Active management is what pays in a sideways decade; passive investing loses its tailwind
The market has gone nowhere since the start of August, and his advice is to sit still
He would buy defense stocks after the midterms, once the spending fear is priced
On his own book: no trades at all last week, and a tax-loss swap out of 4.3% Treasuries into 5% ones
1. A PR Rate Hike
The Fed had raised its policy rate by a quarter point the day before, the first increase since 2023, and the vote was unanimous after more than a year of dissents. Adam Taggart put the market-implied probability at 93% going in. Roberts put it at 92% and said that was the whole story.
The market told the Fed it had permission
Like you said the market gave them the green light to hike rates.
Lance Roberts
Taggart had suggested a week earlier that the Fed might simply need a public-relations hike. Roberts agreed: "That was really all this was." He added that a hike aimed at the market is not the same thing as a hike aimed at the economy, and that the two get confused. "You know, again, it's important to remember why the Fed hikes rates and that's not necessarily good for you, but from a market standpoint, if you're trying to appease the market you do kind of what the market wanted you to do, and that's what they did."
Nothing in the data called for it
If you take a look at the actual data, there was no support for a rate hike. This was simply a market narrative rate hike.
Lance Roberts
2. The Term Premium Gap
The 10-year Treasury yield had pushed above 5%, and the common reading is that the bond market is worried about inflation. Roberts said the rise is neither the Fed's doing nor the economy's. It is term premium, the extra yield investors demand for holding longer-dated paper, and he priced it against two numbers.
Fair value on the 10-year is about 4.6%
So you take a kind of add those two together, you're roughly about 4.6 and you're getting close to five on the yield.
Lance Roberts
The two numbers were the Atlanta Fed's growth tracker, which he put at 2.1% to 2.2% annualized, and core inflation at 2.4%. The gap between that sum and the market yield is what he calls free yield, and he attributes it to headline risk around oil prices and Iran rather than to the fundamentals of the bonds themselves.
The gap closes, and the hike starts the process
That's not going to last indefinitely and eventually that term premium is going to collapse back to the fundamentals. And the Fed just started that process yesterday by hiking rates.
Lance Roberts
His reasoning runs through the economy rather than around it. A central bank has no instrument that reaches prices directly; it can only slow demand.
The Fed has no tool that touches inflation
The Fed cannot attack inflation directly. They have no tool for that.
Lance Roberts
Slowing the economy is what brings yields down
So if I'm slowing the economy, that slows inflation and that eventually brings yields lower.
Lance Roberts
Roberts was blunt about what that costs the household cheering for it. Growth is running near 2%, which leaves little room before a recession, and the rate increase lands first on the debts ordinary people carry: "Raising your short-term borrowing cost, raising your credit card interest, your auto loans your buy now pay later if you're using that. Those rates all just went up by this Fed rate hike."
3. The End of TINA
After 2008 the Fed cut to zero and bought bonds specifically to make cash and Treasuries unattractive. Investors called the result TINA, for there is no alternative, and Taggart described the mechanism as pushing capital out the risk curve. Roberts said that trade has ended, because cash now pays over 3% and five- to seven-year Treasuries about four and a half percent.
Institutions are buying bonds as fast as they can
So you're seeing pension funds, hedge funds, everybody that have annuity type structures that they've got to meet on an annualized basis are buying bonds as basically as fast as they can buy them right now.
Lance Roberts
Pension funds, insurers and hedge funds with actuarial obligations generally target about 7% a year. For fifteen years that target could only be reached by owning a lot of equities.
The equity share of a 7% target falls to 2%
Now I can go buy Treasury bonds at 5%. I've got to make 2% out of equity side.
Lance Roberts
And the same arithmetic works for a retiree
And for people going into retirement, this is a gift. I mean, I can now take a million bucks in my retirement, pick up 5% a year. There's 50,000 of my income I don't have to worry about.
Lance Roberts
He showed a chart of year-to-date fund flows by asset class, with high-grade credit, short-term paper, municipal bonds, high-yield and loans at the top and equities at the bottom: "This year equities are at 1.3%. It's at the very bottom of the list, right?" Taggart read it back as more money going into credit than into equities, then asked the question the chart implies. If zero rates inflated asset prices by forcing money into them, does reversing the policy deflate them?
Taggart also relayed Ed Yardeni's version of the upside, from an interview recorded the previous day: roughly $90 trillion of assets held by baby boomers and another $20 trillion in the silent generation, $110 trillion in all, throwing off more income every month as yields rise, and most of it getting spent.
4. Where the Deficit Lands
Roberts' answer to the debt-and-deficit argument is an accounting one. Government spending does not disappear; it lands in somebody's income.
Defense spending becomes payroll
Defense spending, $950 billion. Where does that go? Goes to defense companies. What do defense companies do with it? They hire employees to build planes, trains, and automobiles.
Lance Roberts
Bond income comes back the same way
What they're missing is that all that income from bonds winds up back in the economy.
Lance Roberts
He named comparing the federal budget to a household balance sheet as one of the big fallacies in the debate, since the two work differently. He was equally careful not to be read as a deficit apologist. Asked by Taggart to separate the short run from the long run, he did it in one line: "Stimulus short run. Long run, it's negative. Has a negative multiplier effect in the economy."
5. Why Rates Haven't Bitten
Equities are long-duration assets, so a higher discount rate should lower their value. Roberts agreed with the textbook and then explained why the market has ignored it.
The market should already be under pressure
And historically, what we should be seeing is that the market should already be under pressure because interest rates are going up, the cost of capital's going up.
Lance Roberts
The claim put on the show was that this year's move in yields alone should have left the market down 5% to 10%. It has not happened, and the reason he gave is the corporate balance sheet.
Interest coverage is at a record
But that's not happening. And one of the reasons that isn't happening is that the interest coverage ratio of companies is at basically an all-time high.
Lance Roberts
His chart of S&P 500 interest expense divided by debt, plotted against the 10-year Treasury yield, shows how little of the move has reached companies so far.
Companies are paying about 2.25%, not 5%
So you can see that even though the interest rate on the 10-year Treasury is close to five, it's around two and a quarter% for most corporations.
Lance Roberts
Much of the outstanding corporate debt was issued at zero to 1%. It does come due, but not in one block. Taggart raised the maturity wall and put roughly a trillion dollars of repricing in this year alone; Roberts set that against what he called "a 64 trillion dollar stock market" and pointed to the schedule.
A few hundred billion a month is absorbable
So it allows the market to absorb that and with earnings as strong as they are, markets are able to kind of overlook that interest cost coverage issue because there's plenty of cash sitting on the balance sheet to cover it.
Lance Roberts
He said profitability is strong well beyond the largest technology companies: "The economy is doing fine, earnings are doing pretty well for a vast majority of companies." Corporate profit margins, on his reading, are at all-time highs. Taggart noted that the Atlanta Fed's third-quarter growth estimate was above 5%, which makes a higher cost of capital easier to carry.
There is a level where it bites
But to your point, if interest rates stay up here at 5%ish or so even say they go to six, at some point that is definitely going to start to impact the markets and you're going to see an equity correction.
Lance Roberts
At that point, he said, a 5% yield on a 10-year Treasury starts to look attractive against equities falling 10% to 15%.
6. The Next Secular Bear
Asked whether permanently higher yields mean rougher going for stocks over decades, Roberts said the next secular bear market is coming, and then spent several minutes on what that phrase does and does not mean. A lost decade, he said, is the same thing.
He pulled up a Ned Davis Research chart of the S&P 500 on a log scale back to 1920: the 1929 peak, a sideways stretch from roughly 1933 to 1949 containing both a violent rally into 1937 and a full round trip down to 1942, then a bull run to the early 1960s, then another sideways period that lasted until 1982. These stretches run about 15 to 18 years, contain the biggest rallies in the record because they start from depressed valuations, and end with investors no better off than when they began.
The current one, on his reading, is long in the tooth and trading above its long-term trend channel in the way it did in 2000. He was careful about the timing.
It is not tomorrow, and it is not a forecast
This is all assumption. This is not market timing. All this can change depending on the data.
Lance Roberts
The next secular period may be a decade away
This could be another two or three years out.
Lance Roberts
His second chart made the valuation case through earnings rather than prices.
Earnings are two standard deviations above trend
This is earnings, by the way. We're currently trading above the long-term trend. We're two standard deviations above the ceiling for earnings going back to 1935.
Lance Roberts
Something eventually pulls earnings back to that trend line, he said, because it always has, and a reversion rarely settles neatly on the mean — it usually overshoots below it. Artificial intelligence does not exempt the arithmetic in his view, and neither does impatience.
The timing is the part nobody knows
It doesn't mean it's going to happen today. It doesn't mean it's going to happen next week, next month, next year, two years from now, three years from now. It might be five years from now.
Lance Roberts
Taggart asked him to state plainly that he is not ideologically bearish, and Roberts agreed that a warning about the 2030s is not a reason to sell anything today. Declining earnings, deteriorating price action and slowing economic data would come first.
You get plenty of warning
You're going to have plenty of time to see it coming.
Lance Roberts
7. Passive Loses Its Tailwind
Taggart offered a broad-brush proposition: in a secular bull market, active management matters less, because the tailwind does the work and anyone buying index funds and buying dips looks clever. Roberts accepted the first half and pushed back on the second.
Active management is what pays in a sideways decade
But that's where active management really adds a ton of value because it can help you sidestep hopefully the worst of the drawdowns and give you dry powder to deploy at those cyclical low points
Lance Roberts
His qualifier was that being active is not the same as being good at it.
Doing things at random is the fastest way to lose
No, just willy-nilly doing stuff is probably the fastest way to the poor house.
Lance Roberts
The chart behind this part of the conversation compared the same $1 million invested at high valuations and at low valuations across the 25 years from 2000 to 2025, with a 4% withdrawal rate running against it. The drag compounds: a market down 10% plus a 4% withdrawal is a 14% hole, closer to 20% after tax, and a 10% rally the following year does not fill it. Someone who started in 2008 could make mistakes and be forgiven them; someone starting now, on his account, will not be.
Two more articles are on the way, one on sequence-of-returns risk and one on gambling, and he thinks the second is the bigger problem.
Two generations have been trained to speculate
And the other is one on gambling. And you know, we've now created an entire two generations now, millennials and Gen Z, that we've just driven into gambling.
Lance Roberts
8. Trained to Be Optimistic
Told he might disappoint viewers who think of him as a bull, Roberts said the label is backwards.
His natural setting is bearish
I am by nature very bearish.
Lance Roberts
He is writing a piece called "optimism as an investment strategy", on the argument that optimists do better over time because putting capital at risk requires it, and that he has had to train himself into it and follow the data instead of his instincts. Taggart made the same point about his own bookings, saying he screens for a data-driven approach rather than a view, and that he had Ed Yardeni and Tom McClellan on the channel in the same week as a bull and a technician.
Roberts' practical advice on this was short.
Turn the media off
And again this is why I encourage you if you're managing your own money, turn off the media because the media is your worst enemy in managing.
Lance Roberts
He showed a chart comparing what Americans actually die from against what the news covers: homicide dominates the coverage, heart disease and cancer dominate the deaths. Financial media works the same way, he said, which is why doom sells and why the debt and deficit stories get the clicks. Taggart extended it to doom scrolling and to his own fear of sharks, a risk he put at "0.002%" while treating it as the likely outcome of leaving the house.
What that does to a reader
The point of the article though is that we take in so much stuff that's coming in from the media. It's affecting our perception of reality.
Lance Roberts
That day's article on the site applied the same test to the K-shaped economy, the idea that the gains have gone to the top and everyone else is stuck.
The bottom half has been getting better off
So even though there's this concern about this K-shaped economy, the bottom 50% have been improving for the last 15 years.
Lance Roberts
Taggart said he had not read the piece yet and wanted to come back to it, so the two agreed to take it up the following week.
9. Time Is Not Recoverable
Roberts said the median American's wealth is poor for reasons that start with behavior: too little saved, too much lost, and then no return to the market at all.
People who left in 2008 are still out
I still have people coming in my office in 2026 that got out of the market in 2008 because they were convinced the market was going to zero
Lance Roberts
Almost every mistake in investing can be repaired, he said, given enough runway. One cannot.
The single thing that cannot be replaced
The one thing I can't get more of is time.
Lance Roberts
The arithmetic on the show ran like this: a first job, a marriage, children, a mortgage and college tuition mean most people get serious about saving in their forties, which leaves 15 to 20 years before retirement. That is the constraint the charts of century-long returns quietly assume away.
10. Sideways Since August
The technical section was short because, as Roberts put it, the market has done nothing for two months. He walked through the week anyway: a break below the 50-day moving average on Tuesday, a decline to the 100-day on Wednesday, the day of the Fed announcement, a bounce off it into the close on heavy prior buying volume at that level, and a move back above the 50-day on Thursday that cancelled the break.
One day defensives win, the next day they are sold
This is a really difficult market to navigate because one day it is staples, defensives, and financials that are doing great and technology is getting monkey hammered.
Lance Roberts
Chasing that rotation is how traders lose money in a range, and his answer was to stop trading it.
Do nothing until the market picks a direction
So, don't do anything here. Just be patient and see what happens.
Lance Roberts
Momentum is decently oversold and relative strength is not extreme. The conversation was recorded on a Friday that was also quadruple witching, when stock options, index options, index futures and single-stock futures all expire and positions are rolled, so he told viewers to ignore the day's price action entirely. Looking into the following fortnight, he flagged downside risk back to the 100-day moving average, quarter-end rebalancing with bonds underweight and stocks overweight, and the absence of corporate buybacks, which removes a source of buying rather than adding selling.
Get through four weeks and the calendar turns
So if you can just kind of get through the next four weeks intact, things get much better looking as we head into year end.
Lance Roberts
Earnings season and the reopening of buyback windows are what change it. Nothing in the price action is technically wrong, he added: a market corrects either by falling or by going sideways, and this one is doing the second.
11. Midterms, Then a Rally
The pressure he can see in individual sectors is political rather than economic.
Defense is being sold ahead of the election
Defense stocks have been under a lot of pressure.
Lance Roberts
The fear he described is that Democrats take the House or the Senate and move to constrain defense spending, which would reach Raytheon, General Dynamics and Lockheed Martin. He said he "would probably be a buyer of defense stocks" once the election is past. Taggart added that the armaments used in Iran still have to be replaced.
Taggart then relayed Tom McClellan's view from an interview earlier in the week, which points the same way for different reasons. The third year of the presidential cycle is historically the best year for the market, with only two or three down years in the record since the election calendar took its current shape, and the 12-month run tends to begin a couple of weeks before the midterm vote. Roberts offered a guess as to why, while flagging it as his own speculation: polling gives Wall Street enough of a read to start positioning. The two then agreed the polls are usually wrong, and that more data seems to have made them worse.
12. The Marshmallow Test
Taggart brought up Walter Mischel's Stanford experiment, in which a child left alone with a marshmallow is promised a second one for not eating it, and the children who could not wait turned out decades later to make more impulsive decisions. He asked Roberts to guess the share who failed. Roberts said "60%."
Taggart's own figure was higher. He added that a later version of the study, run with Oreo cookies, came in at "66%".
Impulse control is learned, or it is not
I've talked about people like my mother who just didn't have any financial education and she you know she would go for the marshmallow all the time and usually to her longer term detriment.
Lance Roberts
Taggart's supporting example was The Traitors, the competition show in which Alan Cumming gathers 20 contestants in a Scottish castle to play for $250,000. Asked at the start what they would do with the money, almost every contestant named something to buy. None of them said they would invest it and spend the returns. Roberts tied it back to human wiring: coming across a tree with fruit, the instinct is to eat all of it, which serves nobody with a 20-year plan.
13. Year-End Tax-Loss Swaps
Asked what he had traded in the past week, Roberts had a one-word answer.
He sat out the Fed meeting
None this week, but only because of the Fed and what was going on.
Lance Roberts
The portfolio is in good shape, with a few positions to add to and a few to trim. The idea he did want to raise was a tax trade in Treasuries. An investor holding 10-year notes bought at 4.3% is down on price and has been collecting the coupon; selling them books a tax loss, and the proceeds buy a 5% Treasury, which raises the income. An investor who wants less interest-rate sensitivity can shorten into five- to seven-year paper at roughly four and three-quarters. Taggart pointed out that if Roberts and his colleague Michael Lebowitz are right about the direction of yields, the swap also buys price appreciation.
Waiting is paid for
And again that lower turn in interest rates may not occur for another couple of years. But in the meantime, I'm getting paid between 4.7 and 5% just to sit on my money and let it play out in time.
Lance Roberts
And there are several ways rates come down
So there's a lot of catalyst over the next three to five years that could really drive lower rates, which would certainly also help appreciate bonds.
Lance Roberts
He tied it to the calendar. Required minimum distributions have to come out of retirement accounts before year end, which forces a sale anyway, and that makes this the season to decide where the money comes from.
Bonus Insights
On the political push to slow AI development, which Taggart raised as a possible risk to earnings estimates and wanted a longer conversation about, Roberts gave a one-line objection.
You're going to slow down so China can catch up. That makes no sense.
Lance Roberts
He compared it to arguing that nuclear weapons were dangerous and the United States should therefore have gone slower and let the Soviet Union get there first.
Taggart floated a poker tournament for the audience, on the theory that a speculative streak is better spent at a table than in a portfolio, with half the pot to the winner and half to charity. Roberts suggested a casino in Las Vegas would host it; Taggart, who lives in Reno, wanted it in his own town.
Taggart's own annual get-together is the Gentleman's Olympics, now in its thirteenth year: 20 to 50 friends in thrift-store period clothing working through a March Madness bracket of ping pong, darts, billiards, foosball, shuffleboard, horseshoes, bocce and axe throwing, with a mystery event each year that this time is bowling. The winner gets a smoking jacket with his name stitched on the sleeve. The organizer's children became valets as they reached middle school, and are tipped generously by the drunker competitors. He has never won, though he used to take the axe throwing and the bocce.
Michael Lebowitz sits in next week. Roberts said he had emailed to arrange it, and will be back the week after.
Roberts' bottom line is that the things worth worrying about are all real and none of them is this month's problem: a secular bear market, a reversion in earnings, and a cost of capital that eventually reaches corporate balance sheets. The trade available this month is to sit still and get paid 5% to do it.
Products, Companies & Tools Mentioned
RIA Advisors (Roberts' firm, where he is Chief Investment Strategist; the source of the charts and the articles he referred to throughout)
Ned Davis Research (Produced the log-scale chart of the S&P 500 back to 1920 he used to date the secular bull and bear periods)
Atlanta Fed GDPNow (His source for third-quarter growth, which he used with core inflation to price fair value on the 10-year)
Raytheon, General Dynamics and Lockheed Martin (The defense contractors he says are under pressure on fear of a spending cut after the midterms, and that he would buy once the vote is past)
Google, Amazon and Microsoft (Stripped out of his interest-coverage chart, along with their non-operating income, so the figure reflects the median company)
The Traitors (Taggart's example of impulse control: 20 contestants playing for $250,000, almost all of whom planned to spend it)
Books & Resources Mentioned
Real Investment Advice (Where his weekly newsletter and the articles he cited are published, including that day's piece on the K-shaped economy and a five-part series on investing for the long run)
The Stanford marshmallow experiment (Walter Mischel's study of delayed gratification in children, which Taggart used to argue that impulse control predicts financial outcomes)
The Enneagram (The personality framework Taggart used to describe himself as a type 6, wired to scan for threats)
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