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Friday Focus - October 2, 2026
10/02/26
FRIDAY FOCUS: Smart insight and clear visuals that matter – what we’re watching now and how intention and conviction shape our portfolios.
Markets
Strength at the Top, Weakness Across the Market
Just as the market-cap-weighted S&P approaches 5% of its all-time high valuation multiple, the equal-weighted market has quietly been taking on water. We have seen the 7th consecutive weekly decline in RSP (the equal-weighted index). The first graph depicts this time series. The second is the quilt chart for September and depicts how poorly market breadth fared last month.
Source: Daily Chartbook
Stocks Aren’t Cheap
The U.S. equity risk premium is at its lowest level since 2002, though it admittedly traded at even lower levels in the 1980s and 1990s. If we really are experiencing a change in interest rates, it may be the case that the ERP will be structurally lower than we’ve become accustomed to in the post-dot-com and especially post-global financial crisis eras.
Rates
Higher Yields Are Reviving the Case for Treasuries
The persistent move higher in rates has laid bare one of the most difficult questions for fixed income investors — where exactly is fair value for Treasuries?
Treasury yields have risen precipitously in recent months, with nominal 10y yields climbing by 70bp since the June FOMC meeting and 125bp since early March. US 10 yr Treasuries have breached 5%, driven by a combination of rising Fed hike expectations, higher growth expectations, higher oil prices, fiscal concerns, and hyperscaler issuance. The persistent move higher in rates has continued to raise questions around "fair value". Using a combination of r*, inflation expectations, and term premium and a combination of inflation expectations and potential growth, two ranges for 10y "fair value" emerge — 4.25-5.25% and 4.30-4.75%. For investors willing to hold through near-term volatility, the current risk-reward profile for buying Treasuries is appealing.
Tech
AI's Productivity Gains May Come with a Talent Pipeline Challenge
AI may change how careers begin before its effects become obvious in overall employment. Stanford researchers find a widening divide among young workers in their August article, “Canaries in the Coal Mine”. In their ADP sample, employment among workers aged 22–25 in the two most AI-exposed groups of occupations fell about 11% between November 2022 and June 2026. Employment for the same age group in the three least exposed groups rose by about 10%. The researchers find that reduced hiring is the principal channel behind the divergence. Increased departures do not explain it, and older workers show no comparable persistent gap. That distinction matters: fewer openings can make it harder to enter a profession even when workers already established in it continue to find demand for their skills.
The authors suggest that AI may substitute for knowledge that can be written down while complementing judgment developed through experience. If companies rely less on junior employees for routine work, how will they provide the practice and responsibility through which future experts develop? The research does not demonstrate an impending shortage of expertise. It does give us a reason to examine employee development alongside prospective productivity gains. A company's ability to use AI effectively may depend partly on how it finds a solution for continuing to cultivate the human judgment that allows technology to be leveraged responsibly.
GPT-4 β. Employment changes by age and exposure quintile using measures from Eloundou et al. (2024). Exposure quintiles are defined based on the GPT-4 β measures. Darker lines are more exposed quintiles. The red line shows the overall trend pooling across quintiles. Source: Brynjolfsson, Chandar and Chen, Canaries in the Coal Mine, August 2026; ADP data through June 2026.
Economic Calendar: Week Ahead (Eastern Time)
Mon, 10/5 @ 9:45 am: U.S. Services PMI
@ 10:00 am: ISM Report On Business Services PMI
Tues, 10/6 @ 8:30 am: U.S. Trade Balance
Wed, 10/7 @ 2:00 pm: Federal Open Market Committee Meeting Minutes
@ 3:00 pm: Consumer Credit
Thu, 10/8 @ 8:30 am: Weekly Jobless Claims
@ 10:00 am: Monthly Wholesale Trade
Fri, 10/9 @ 10:00 am: U. Michigan Prelim Consumer Survey
The Team Behind Friday Focus
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Investment advisory services are offered through First Foundation Advisors, an SEC-registered investment adviser. FirstSun Advisors is a tradename used by First Foundation Advisors as it works to integrate names following its merger into the FirstSun Capital Bancorp family of brands. Registration with the SEC does not imply a certain level of skill or training. Investments and insurance products are not FDIC-insured, are not a deposit or other obligation of, or guaranteed by the bank or an affiliate of the bank, are not insured by any federal government agency and are subject to investment risks, including possible loss of the principal amount invested. FirstSun Advisors is a wholly owned subsidiary of FirstSun Capital Bancorp.