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The past few months have been difficult to navigate for Wall Street investors. However, as Wall Street investors return to their desks for fall, several bullish factors are simultaneously aligning. Below are 5 reasons to buy stocks:
1.)Sentiment: The AAII Sentiment Survey is a weekly poll conducted by the American Association of Individual Investors. Since 1987, it has asked its members one simple question: “Do you feel the direction of the stock market over the next six months will be up (bullish), no change (neutral), or down (bearish)?” Because the survey tracks the opinions of "Main Street" individual investors rather than institutional "Wall Street" pros, it is widely regarded as one of the best contrarian indicators in finance. In investing, when almost everyone agrees on a direction, the market often does the opposite. If the AAII survey shows more bears than bulls (high pessimism), contrarians see it as a "Buy" signal for three main reasons: money is on the sidelines, emotional extremes occur at market bottoms, and expectations are already low, making it easier for the economy to beat those expectations. Bearish sentiment is overwhelming, with 48% of respondents bearish.
Image Source: AAII
2.) A Potential Breadth Washout is Brewing: The S&P 500 AD Line fell below its 200-DMA for the first time since Nov 2023. Prior drops marked sharp inflection points. The last time was before the 2022 bear market. One before was during the COVID dip, leading to a 75% gain in 1 year. The prior marked the bottom of the 2018 bear market. Since 2000, the S&P 500 index has been higher 100% of the time 2 weeks, 3 weeks, and 1 month later. Over 6 months, the S&P 500 was higher 80% of the time, with a juicy 14.5% average gain. (Data courtesy of Bluekurtic Market Insights @BlueKurtic)
3.) Inflation Fears are Overdone: Although energy has been a major headwind for stocks, inflation outside of that is cooling. The Truflation reading (a more accurate, responsive measure of inflation) shows CPI at just 2.53%. Meanwhile, according to Goldman Sachs, the pass-through of tariffs to consumer prices is mostly done.
Image Source: Goldman Sachs
4.) Gridlock is Good: Stock market returns during periods of a divided federal government have “typically exceeded returns achieved when one political party controls the White House, Senate, and House of Representatives,” David Kostin, chief U.S. equity strategist at Goldman Sachs, wrote in his 2020 outlook. Since 1928, the S&P 500 has averaged a 12-month return of 11 percent when the election resulted in a divided government and 8 percent when a unified government was voted in. Both returns were up one percentage point excluding recessions.
Image Source: Goldman Sachs
5.) Seasonal Tailwinds: Thus far in 2026, the market has been closely following historical mid-term election cycle seasonality trends. Historically, stocks rally in the first quarter, then consolidate in the summer as money managers take vacations, and investors reduce risk ahead of election uncertainty. However, investors who have preserved capital through the summer may be in for a treat. October has been the best month in midterm years historically and November the second best.” Since 1950, the S&P 500 Index has delivered returns in each month about 70% of the time, with October’s average gain 3% and November’s at 2.7%.
Meta’s ((META - Free Report) ) gangbuster’s agentic AI debut has injected life back into AI stocks. Meanwhile, NVIDIA ((NVDA - Free Report) ) announced the largest stock buyback in history on Monday. Micron ((MU - Free Report) ) will report earnings Wednesday. You can read my preview here.
Bottom Line
The convergence of extreme sentiment, a breadth washout, an inflation overreaction, political gridlock, and favorable seasonal tailwinds creates a compelling setup for investors.
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Image: Bigstock
5 Reasons to Buy Stocks Now
Key Takeaways
The past few months have been difficult to navigate for Wall Street investors. However, as Wall Street investors return to their desks for fall, several bullish factors are simultaneously aligning. Below are 5 reasons to buy stocks:
1.) Sentiment: The AAII Sentiment Survey is a weekly poll conducted by the American Association of Individual Investors. Since 1987, it has asked its members one simple question: “Do you feel the direction of the stock market over the next six months will be up (bullish), no change (neutral), or down (bearish)?” Because the survey tracks the opinions of "Main Street" individual investors rather than institutional "Wall Street" pros, it is widely regarded as one of the best contrarian indicators in finance. In investing, when almost everyone agrees on a direction, the market often does the opposite. If the AAII survey shows more bears than bulls (high pessimism), contrarians see it as a "Buy" signal for three main reasons: money is on the sidelines, emotional extremes occur at market bottoms, and expectations are already low, making it easier for the economy to beat those expectations. Bearish sentiment is overwhelming, with 48% of respondents bearish.
Image Source: AAII
2.) A Potential Breadth Washout is Brewing: The S&P 500 AD Line fell below its 200-DMA for the first time since Nov 2023. Prior drops marked sharp inflection points. The last time was before the 2022 bear market. One before was during the COVID dip, leading to a 75% gain in 1 year. The prior marked the bottom of the 2018 bear market. Since 2000, the S&P 500 index has been higher 100% of the time 2 weeks, 3 weeks, and 1 month later. Over 6 months, the S&P 500 was higher 80% of the time, with a juicy 14.5% average gain. (Data courtesy of Bluekurtic Market Insights @BlueKurtic)
3.) Inflation Fears are Overdone: Although energy has been a major headwind for stocks, inflation outside of that is cooling. The Truflation reading (a more accurate, responsive measure of inflation) shows CPI at just 2.53%. Meanwhile, according to Goldman Sachs, the pass-through of tariffs to consumer prices is mostly done.
Image Source: Goldman Sachs
4.) Gridlock is Good: Stock market returns during periods of a divided federal government have “typically exceeded returns achieved when one political party controls the White House, Senate, and House of Representatives,” David Kostin, chief U.S. equity strategist at Goldman Sachs, wrote in his 2020 outlook. Since 1928, the S&P 500 has averaged a 12-month return of 11 percent when the election resulted in a divided government and 8 percent when a unified government was voted in. Both returns were up one percentage point excluding recessions.
Image Source: Goldman Sachs
5.) Seasonal Tailwinds: Thus far in 2026, the market has been closely following historical mid-term election cycle seasonality trends. Historically, stocks rally in the first quarter, then consolidate in the summer as money managers take vacations, and investors reduce risk ahead of election uncertainty. However, investors who have preserved capital through the summer may be in for a treat. October has been the best month in midterm years historically and November the second best.” Since 1950, the S&P 500 Index has delivered returns in each month about 70% of the time, with October’s average gain 3% and November’s at 2.7%.
Image Source: @AlmanacTrader (StockTradersAlmanac.com)
What Else to Watch:
Meta’s ((META - Free Report) ) gangbuster’s agentic AI debut has injected life back into AI stocks. Meanwhile, NVIDIA ((NVDA - Free Report) ) announced the largest stock buyback in history on Monday. Micron ((MU - Free Report) ) will report earnings Wednesday. You can read my preview here.
Bottom Line
The convergence of extreme sentiment, a breadth washout, an inflation overreaction, political gridlock, and favorable seasonal tailwinds creates a compelling setup for investors.