Everything Says Stocks Should CRASH.. So Why Aren't They?

Investing Simplified - Professor G•Oct 3, 2026

Summary

Nolan analyzes the current market paradox where high bond yields, reaching 5.342%, and a 40% surge in oil prices have not resulted in a stock market crash. Nolan explains that the primary driver for this resilience is robust corporate earnings, with S&P 500 companies projected to grow earnings by over 35% in 2026. Nolan notes that despite the S&P 500 rising 12% year-to-date, valuations have actually decreased from 22x to 19.2x forward earnings because profit growth has outpaced price appreciation. Nolan warns, however, that market breadth is at its lowest level since 2000, with a small group of AI-focused mega-cap companies carrying the indexes while 40% of S&P 500 stocks are actually down for the year.

Nolan advises against a purely reactive strategy, suggesting instead that investors build a portfolio capable of performing under various scenarios, such as continued AI growth, persistent inflation, or a potential recession. Nolan emphasizes that the best portfolio is one that allows an investor to stay committed through the average 14% intra-year declines that characterize the market. For wealth builders, Nolan suggests a core allocation of 60-80% in broad market ETFs, supplemented by diversifiers and a cash/bond buffer based on individual risk tolerance.

S&P 500 (SPY): Nolan recommends the S&P 500 as the foundational core of a portfolio, suggesting a 60-80% allocation for long-term wealth builders. Nolan points out that while the market faces frequent "scary" headlines, the index has historically produced an 11% annualized return over the last 20 years despite multiple crises. Nolan views this index as the best way to capture the innovation and growth of productive companies without the need for constant market timing.

SCHD: Nolan highlights SCHD as an essential "substance" asset for investors looking to diversify away from high-growth technology concentration. Nolan suggests that this dividend-focused ETF serves as a critical buffer, particularly for those near or in retirement who cannot afford high volatility. Nolan notes that such defensive value plays are vital for ensuring a financial plan remains viable if the current AI-driven boom were to face a significant correction.

VTV: Nolan advises using VTV to gain exposure to value stocks, which Nolan believes are necessary to protect a portfolio against "sticky" inflation and high-for-longer interest rates. Nolan explains that a 10-25% allocation to diversifiers like value stocks helps maintain a balanced approach when growth stocks struggle. Nolan emphasizes that holding these assets allows investors to sleep better at night by reducing the risk of a single economic scenario ruining their financial future.

Mentioned Stocks

SPY

Sentiment: BUYAction: RECOMMENDED

Reasoning: Nolan views the S&P 500 as the core of a productive portfolio due to its historical 11% annual returns over the last 20 years and current compressed forward P/E of 19.2x. Nolan argues that strong earnings growth of 35% projected for 2026 makes the broad market resilient despite high interest rates.

Loading chart...

SCHD

Sentiment: BUYAction: RECOMMENDED

Reasoning: Nolan recommends SCHD as a 'substance' asset that provides a defensive buffer for portfolios. Nolan emphasizes its importance for investors near retirement or those wanting to mitigate the risks of a potential AI sector correction.

Loading chart...

VTV

Sentiment: BUYAction: RECOMMENDED

Reasoning: Nolan suggests VTV for value-oriented diversification to protect against persistent inflation and high interest rates. Nolan argues that a 10-25% allocation in such diversifiers ensures a financial plan works even if growth stocks underperform.

Loading chart...