Stock Market Cycles
Lieven Baele (Tilburg U.) and Geert Bekaert (Columbia U.)
October 2026
We develop a new methodology to identify bear and bull markets in the US stock market, which only relies on calibrating a bandwidth parameter around each trading day to define peaks and troughs. We find this bandwidth to be 8 months leading to bear (bull) market spells with a median duration of 74 (294) days and median cumulative returns of-16.2% (+37%). Within each stock market phase, we formulate a regime switching model differentiating between normal down, crash and recovery regimes within a bear market and normal up, risk-on and correction regimes within a bull market. The model has two special features: it focuses on mean regimes and uses cumulated returns rather than daily returns. A daily return model with common volatility and mean regimes performs very poorly. We further validate the model using statistical tests, textual analyses using Wall Street Journal articles and an anatomy of important stock market episodes.
The Bond Rally Faces a Reality Check
The bond market rebound over the past month has fueled hopes that the worst may be over for fixed-income investors. With yields rising to more attractive levels, bonds have become increasingly appealing. Whether this renewed interest marks a timely shift back into the asset class remains to be seen, but the broader trend profile still argues for caution. The bond market, in short, has more work to do before making a compelling case that the bearish sentiment weighing on the asset class has run its course and is giving way to a sustained recovery.
Inflation Fears Push Treasury Yields Further Above Fair Value
The yield premium on the U.S. 10-year Treasury note surged in October as investors demanded greater compensation for inflation and fiscal risks. The rise in the benchmark yield pushed the gap between the market rate and The Capital Spectator’s estimate of fair value to its widest level in more than two years.
Stocks Rebound, but the Real Test Lies Ahead
Monday’s rally raised hopes that last week’s market swoon was merely another short-lived pullback, a familiar pattern in recent years that briefly rattles investor sentiment before quickly fading. Although it’s too soon to determine whether stocks have established a durable bottom, recent price action suggests the market may be moving in that direction. Here are some of the signs I’m watching to decide where we go from here.
GDP Nowcasts Signal Strong Finish to 2026
The acceleration in U.S. economic growth in the third quarter appears set to continue into Q4, according to the latest GDP nowcasts. The Democratic midterm election sweep has rattled Wall Street amid concerns that economic policy could shift in the new year. For now, however, growth remains on track to run at a substantially faster pace than it did during the first half of the year.
Book Bits: 7 November 2026
● Surplus: The History of Too Much and the End of Economic Primacy
Marc Chandler
Interview with author via Katheleen Hays Presents: Central Bank Central
Marc Chandler, the chief market strategist and managing director at Bannockburn Capital Markets, has been covering the currency markets for more than 25 years at some of the largest banks and custodians in the world. Now, as the groundbreaking end of the Bretton Woods Agreement is hitting more than half a century, Marc is zeroing in on what this has meant for global currency markets back then and where he sees the dollar heading next.
As he wrote in a recent piece, “Fifty-five years ago today, Nixon closed the gold window. The move was billed as temporary. It became permanent and launched the dollar into a half-centruy of dominance nobody in 1971 would have predicted. Now, on the anniversary, the cracks in that architecture are getting bigger than ever.”
AI Meets Politics: A New Test for Tech Stocks
Skeptics of the AI-fueled surge in the stock market have long warned that a bubble may be forming. Those concerns deepened after yesterday’s sharp selloff in equities, which marked the market’s worst one-day decline in two years.
Beyond Big Tech: Small Caps Step Into the Spotlight
Small-cap stocks are maintaining their performance advantage this year, putting them on track for their first calendar-year run of leadership over the S&P 500 since 2022, based on a set of ETF proxies.
What Democrats’ Midterm Win Means for Markets
The Democratic rout of Republicans in Tuesday’s midterm elections has far-reaching implications for policy in Washington, which in turn is likely to influence investor sentiment on Wall Street. Here’s a quick look at several of the key issues in play.
Total Return Forecasts: Major Asset Classes | 3 November 2026
The expected return for the Global Market Index (GMI) in the long run ticked higher again in October. The increase marks the sixth straight month of improving return expectations, extending the upward trend in the performance outlook and suggesting that the risk-reward profile for the global opportunity set continues to strengthen for the strategic horizon in the decades ahead.