What nobody’s telling your clients

The market right now resembles a game of musical chairs. The music’s still playing, everyone’s still dancing, and nobody wants to be the one left standing when it stops.

Here’s what we covered in the Q4 2026 market trends webinar — and what clients are about to start asking about.

1. “Diversified” doesn’t mean what clients think it does

The S&P 500 is more dominated by the Magnificent 7 than ever. Through late last year, the Mag 7 grew to account for 58% of the returns of the entire S&P 500.

When clients buy an index fund tracking the S&P 500, they reasonably believe they’re getting a diversified portfolio — maybe 10% in technology here, 10% in something else there. Many do not expect over half of their returns come from seven companies. That’s not diversification. That’s a concentrated bet wrapped in broad-index packaging.

2. The tech sector is priced like never before

The relative valuation of the tech sector has crossed two standard deviations above the S&P 500 — twice in history. Today, it sits significantly above even that threshold.

Six widely used valuation models — the Buffett indicator, price-to-earnings, price-to-sales, interest rate models, mean reversion, and an earnings yield gap model — tell a consistent story. Four are screaming “strongly overvalued.” One says slightly overvalued. One says fairly valued.

Reversion to the mean is one of the most reliable forces in markets. What goes far above trend tends to come back.

3. The Shiller PE ratio is screaming

The Shiller PE (or CAPE ratio) measures how expensive the market is as a whole. The correlation is clear: the higher the starting Shiller PE, the lower the subsequent 10-year returns.

Today, it stands above 40. There have only been a handful of times in history when it was higher. And every single one of those times, the resulting 10-year return was in the 0% range.

The Shiller PE likely can’t climb forever. At some point, the capital simply isn’t there to support these prices.

4. Smart money is already leaving the party

The AI boom drives the Mag 7, which drives the market. But many people who got in early are quietly heading for the exits.

Michael Burry has taken more than $1 billion in options betting against leading AI stocks, including NVIDIA.

Peter Thiel fully cashed out of his NVIDIA position.

SoftBank unloaded its entire $5.8 billion NVIDIA stake to fund its bet on OpenAI.

When the early investors take their money off the table, that’s worth paying attention to.

5. “AGI will solve economics.” No. It probably won't.

OpenAI is committing $500 billion to data centers while its revenue is $13 billion — spending 38 times annual revenue on infrastructure that may be obsolete in three years. When asked if this is sustainable, CEO Sam Altman’s response was: “AGI will solve economics.”

Economics doesn’t need solving any more than physics or mathematics does. Over the long run, stocks are driven by sales, cash flow, and profits. These are not debatable.

We’ve seen this movie before. In the early 2000s, it was the internet. “This time it’s different. Financials don’t matter.” The new accounting was page views and clicks — great until you realize they don’t lead to revenue. Plenty of people lost a fortune on pets.com.

A telling data point: software development job postings on Indeed have fallen below where they were before ChatGPT was released. If companies were as bullish on AI as they claim, hiring should be above pre-ChatGPT levels — not below them.

6. The bubble pattern is familiar

Every bubble — Dutch tulips, Beanie Babies, AI stocks — usually follows the same pattern. Smart money gets in early. Institutional investors pile in. Early investors take their winnings and leave. Then a media moment triggers fear of missing out. Everyone piles in. A “new paradigm” is declared. Then comes the dip, the denial, the bull trap — and then it goes down.

AI is revolutionary. So was the internet. But valuations are getting astronomical while the economic benefits are yet to be determined.

7. Protection as an asset class: the opportunity hiding in plain sight

For decades, advisors have been taught the 60/40 portfolio. Then alternative assets arrived with their lack of correlation to broader indexes, typically making up about 20% of a portfolio.

The approach we advocate is designed to add a different layer: protection as an asset class — strategies like cash value life insurance and fixed indexed annuities that not only lack correlation to market indexes but also offer tax-code diversification.

The income study worth sharing

A leading consulting firm study models a hypothetical 45-year-old couple and compares four approaches, including investments only and combined approaches with investments and fixed indexed annuities or indexed universal life.

Clients who begin funding a fixed indexed annuity around age 55 may see a hypothetical 16% improvement in income versus an investment-only strategy. Add an indexed universal life (IUL) and fixed indexed annuity at 30/30 allocation combined with investments, and the plan could generate more than 15% income potential compared to an investment-only strategy. What's more this IUL, FIA and investment combo could generate 17% more in wealth transfer to heirs.

Keep in mind these are hypothetical examples based on specific assumptions, and not guarantees. Obviously, individual results will vary. But the bottom line here is that there are real opportunities relevant to pre-retirees and retirees to better protect their savings from market and tax risk.

What to do this week

Before the next client review:

Check actual Mag 7 exposure. Most clients will be shocked to learn how concentrated their “diversified” portfolio really is.

Talk about the Shiller PE. Clients deserve to know what the data says about forward returns.

Start the income conversation. For clients in the 50–65 window, the FIA + IUL strategy is worth discussing. Call us at 866.866.7050 to get the full study.

The advisors who win the next decade won’t be the ones with the best models. They’ll be the ones having the best conversations.

Questions from the webinar

Is the stock market overvalued in Q4 2026?

In our view, yes. Four of six widely used valuation models indicate the market is strongly overvalued. The Shiller PE ratio sits above 40, a level historically associated with near-0% returns over the following decade.

Why is the S&P 500 considered concentrated risk?

The Magnificent 7 stocks account for more than half of the S&P 500’s returns. Investors who hold S&P 500 index funds may believe they hold a broadly diversified portfolio, but in practice, their returns are heavily dependent on a small number of technology companies.

Are AI stocks a bubble?

There are significant bubble characteristics in AI valuations. Smart money investors including Michael Burry, Peter Thiel, and SoftBank have reduced or exited their AI positions. OpenAI is spending $500 billion on infrastructure against $13 billion in revenue. Software job postings have fallen below pre-ChatGPT levels. These signals suggest valuations may be running ahead of proven economic benefits.

What is the Shiller PE ratio and why does it matter?

The Shiller PE ratio (or CAPE ratio) measures the price-to-earnings ratio of the S&P 500 using inflation-adjusted earnings averaged over the past 10 years. Historically, when the Shiller PE exceeds 40, subsequent 10-year annualized returns have been near 0%.

How can financial advisors protect client portfolios from market overvaluation?

Advisors can consider adding protection as an asset class — strategies such as fixed indexed annuities and cash value life insurance that lack correlation to broader market indexes and offer tax-code diversification. A leading consulting firm study found that a hypothetical portfolio combining a 30% IUL allocation and 30% FIA allocation may increase retirement income by 15.3% and legacy value by 17% compared to a traditional investment-only approach.

Should all clients move all their money out of the stock market?

No. The point is that concentration risk is higher than most clients realize, and that diversification into non-correlated, tax-advantaged strategies may improve both income and legacy outcomes. Every client’s situation requires individualized advice from a qualified professional.

DISCLOSURES

This blog post reflects the personal opinions and analysis and is intended for educational purposes only. It does not constitute investment advice, tax advice, legal advice, or a recommendation to buy, sell, or hold any security or insurance product.

All retirement income and legacy value figures are hypothetical illustrations based on a study by a leading consulting firm. They are not representative of any actual client’s experience and do not guarantee future results. Actual results will vary based on individual circumstances, product terms, market conditions, fees, and other factors.

Fixed indexed annuities (FIAs) and indexed universal life (IUL) insurance are insurance products subject to terms, conditions, limitations, and fees. They are not securities and are not FDIC insured. IUL policies may lapse if premiums are not paid as required. FIA guarantees are backed by the issuing insurance company’s claims-paying ability. These products may not be suitable for all investors.

References to specific companies and individuals are for illustrative and educational purposes only and do not constitute recommendations to buy or sell any security. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal. Diversification and asset allocation do not guarantee a profit or protect against loss.

Peak Pro Financial does not provide legal or tax advice. Consult a qualified professional regarding your specific situation. Insurance products are offered through appropriately licensed individuals. Product availability and features vary by state.