The Risks That Could Derail the Stock Market Further

On the Sept. 14, 2026, episode of The Morning Filter podcast, hosts Susan Dziubinski and Morningstar Chief US Market Strategist Dave Sekera discussed what risks investors need to have on their radars today. Here is an excerpt from the show.

How Mega-Cap Stocks Are Distorting Market Valuations

Susan Dziubinski: Dave mentioned his September stock market outlook, and we do have a link to that research in the show notes. And Dave, in your outlook, you also had some very interesting commentary about market valuations, maybe how they’re a little bit misleading today. Talk about that.

David Sekera: I wouldn’t necessarily use the word “misleading,” but I think you need to understand what the market valuations are telling us today. Based on where the market is right now, we’re at about a 9% to 10% discount to fair value. Now, as a reminder, I think we look at fair value for the market differently than what you hear from a lot of other market strategists. Other market strategists start with this top-down approach. They have some way that they calculate what they think S&P 500 earnings are going to be for the year. They apply some sort of forward multiple to it, and it seems like they’re always telling you the market’s 9% to 10% undervalued compared to their target price, but really, to me, that’s always been an exercise really more for goal-seeking than it was necessarily true valuation.

Of course, here in the US, we cover over 700 stocks that trade on US exchanges, all the biggest of the large-cap and even a high percentage of the mid-cap stocks out there. What we do is we put together this bottom-up analysis. We put together a composite of the total market capitalization of all of those companies, and we divide into that the intrinsic valuation as determined by our equity analyst team on those same stocks, and that gets to that

At a 10% discount, that’s usually the area where I would start thinking, “This might be a good time to start overweighting US equities.” But in this case, I really have to point out how the undervaluation is especially concentrated and why I’m not necessarily willing at this point to go to that overweight recommendation. If we look at all of the big mega-cap stocks, there are seven of those right now that account for essentially the entire discount for the marketplace today, with those seven stocks being Nvidia NVDA, Alphabet GOOGL, Microsoft MSFT, Amazon AMZN, Broadcom AVGO, Meta META, and Tesla TSLA. And of course, each of those, in some way, shape, or form, is going to be a play on artificial intelligence, maybe in slightly different ways, but still an AI play at the end of the day.

Now, if I take those stocks out of our fair value calculation, the rest of the market is pretty close to being at fair value today. And, of course, those mega-cap stocks also end up skewing a lot of the different sectors. There are some sectors that appear more attractive than others, but it’s really because of how those mega-cap stocks skew those individual sectors. So in that case, I’m not even really looking at wanting to be overweight or underweight individual sectors so much because, unfortunately, it’s really a stock-pickers’ market. And I always hate the term “stock-pickers’ market,” because it’s always a stock-pickers’ market, but it is essentially much more so today, with the market, once you take those seven stocks out, being much closer to fair value.

The Biggest Risks Facing Stock Investors Today

Dziubinski: You’re still recommending a market weight in equities. From your perspective, Dave, what are the risks the stock investor is facing today or needs to have on radar today?

Sekera: The biggest risks to me are the macrodynamics. First of all, the United States 10-year is really trying to hit that 5% level. If it goes above 5% and stays there, I think that has a lot of implications, negative implications for the market. Specifically, once it gets that high, I think, one, that’s just a psychological hurdle. Once it gets that high, I think that’s going to drive some negative market sentiment. But at the same time, you’ll get some investors, especially those investors who do asset-liability duration matching and might move out of equities into fixed income, pension funds, insurance companies, and so forth. You might also have some people reevaluate what the risk-free rate is in their discounted cash flow models. They might bump that up, and that, of course, would have a very negative impact on long-duration stocks, which are typically those growth stocks.

We have the Fed hiking. The adage is “Don’t fight the Fed,” so the Fed’s going to be hiking at least one, if not two, possibly even three times. Oil is still going the wrong way. When I look at the international economies, there’s really no one to bail out any potential weakness. Europe, I think, is pretty stagnant at best. From what I can see in China, I think the Chinese economy is probably weaker than what’s being reported. Some of the other risks that we’ve talked about out there, like Japanese government bonds and the yen, look like the interventions from the BOJ and the United States government have kept that under control. But again, I think you need to keep a close eye on that.

And of course, the elephant in the room is the US market is still just highly dependent on the continued spending and increase in spending on artificial intelligence, on the AI buildout boom. Any kind of hint of a slowing rate of spending, I think, is going to send a lot of those stocks down very quickly. And of course I sound like Negative Nancy here, and I don’t want to sound like everything is really that negative, because again, if you look at the valuations, especially on a lot of those big stocks, we think they are undervalued. So, when I’m thinking about trading and investing, not just for the latter part of this year, but going into 2027, I think what the market’s going to need to take that next leg up and move toward our intrinsic valuations is to start getting more comfort that spending on AI isn’t necessarily only going to be what the market’s already expecting for 2027, but that growth continues into 2028. And once we get that comfort, then I think there’s still a lot more upside in those seven stocks that we talked about.

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