Thoughtful Money · Sep 26, 2026 · 1h 4m · 46m saved
With Michael Lebowitz, Co-Portfolio Manager at RIA Advisors
The S&P 500 is a couple of percent off its all-time high, but Michael Lebowitz said the equal-weighted version of the index is down 4% and utilities are down 9%. A handful of AI and technology stocks, he said, are hiding the damage that rising rates are already doing.
Most market commentary reads the index as calm. Lebowitz reads the same chart as a market where 10 or 20 stocks carry everything else, and he compared it to a basketball team of LeBron James and four skeletons.
"The risk is that LeBron gets injured and the skeletons just can't play — that's the problem with rates: if they keep going up, LeBron will get hurt and it's going to continue to drag on those other sectors."
Michael Lebowitz, co-portfolio manager at RIA Advisors, on Thoughtful Money's weekly market recap, recorded early on Thursday, September 24, while his colleague Lance Roberts had the week off. His firm this week sold part of its longer bond position to buy the newly auctioned 5-year Treasury at 5%, trimmed large technology stocks and added to value stocks and utilities.
The full interview is covered here so you can skip it. 64 minutes of audio, 18 minutes of reading.
Here are the 17 calls that matter.
Key Takeaways
Higher rates reach the economy with a lag, and Lebowitz expects them to win out over the push to run the economy hot
Companies that borrowed in 2021 may see their rate go from 2.5% to 6% as the debt comes due
The S&P 500 looks calm while rate-sensitive sectors are already falling
His firm's dispersion index is at a level that three times before was followed by market declines
The biggest AI risk is not default but a cut in data-center spending by Google, Meta and Microsoft
Oracle is the exception, with bonds trading at junk levels
Take out data-center growth and the US economy has barely grown, in his view
The Fed raised its rate forecast for next year without lowering its inflation or growth forecasts, which he called very odd
A newly auctioned 5-year Treasury at 5% gives investors an option, he said: sell it for a gain if stocks fall hard and buy them cheap
Bonds are now a real alternative to stocks, which he expects to return little over 10 years
Oil is the swing factor: crude at 120 would hurt the value stocks his firm just bought, and a deal with Iran could send it to 70
1. Rates Hit With a Lag
The host said the 10-year Treasury yield had jumped to about 5.1 and asked whether there is a point where yields this high start to break things. Lebowitz said yes, but that different rates take different amounts of time to work.
Mortgage rates move the economy slowly; short-term rates move it at once
"Mortgage rates are very slow to impact the economy — we've seen the housing market come to a standstill, but that has a limited impact on the economy." — Michael Lebowitz
He said a rise in the federal funds rate changes credit card rates and floating corporate borrowing rates immediately. The Fed cannot set prices or control oil, which he said is what is driving inflation, so its only tool is to slow the economy down.
Companies that borrowed cheaply in 2021 face much higher costs
"Those bonds come due this year, next year, the year after — as they come due, a corporation's interest rate may go from 2.5% to 6%." — Michael Lebowitz
He said companies respond by cutting costs to protect profit margins.
"Cut employees, reduce capex, close stores — something to try to keep margins where they're at." — Michael Lebowitz
High rates tend to bring low rates
"Ultimately that's why they say higher rates beget lower rates — it's such a huge factor in the economy, both here and globally." — Michael Lebowitz
He added that the same squeeze is happening abroad, which reduces foreign demand for US goods. The host compared the idea to the Doomberg newsletter's line that every oil shortage is followed by a glut. He also said higher rates should, in theory, pull asset prices down by raising the discount rate on future cash flows, but that this had not happened yet.
