Reader Mailbag: September 2026

The air is crisp, our jackets are out, the days are shorter, it can only mean one thing: football season! Well, ok, maybe two things: Time for our first autumn mailbag!

You often use Sir John Templeton’s quote that bull markets are “born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” Where do you think we are in that progression now?

Mostly “optimism,” but with some pockets of euphoria and lingering skepticism. Overall, investors seem to fathom a growing economy and solid corporate earnings. Recession fears are in short supply. But consumer and investment surveys have shown plenty of trepidation, particularly in Europe, where headlines are also gloomier. That is your lingering skepticism. But there is also some simmering euphoria, which you can see in the frenzies over AI-related IPOs, the abundance of leveraged ETFs and the hype over prediction markets (which are now about to get the ETF treatment). So to us, this bull market looks later-stage, which is still historically a very nice time for returns and can run on for a considerable period.

How do data centers and their water usage affect markets and the economy?

On both fronts, water usage is generally a non-issue. We know, we have seen all the articles about the tens of thousands of gallons of water data centers use for cooling in a single day. But here is the thing: These are mostly closed-loop cooling systems. It is all just the same water running round and round in sealed pipes, with precious little evaporation, and firms are pioneering technology to recapture water that escapes. A typical data center’s annual water consumption amounts to that of a few houses.

So that leaves the data centers themselves, and you can treat that as you would all business investment in property and machinery: It adds to GDP and therefore economic growth. For stock market purposes, all this stuff falls under corporate capital expenditures, also known as “capex.” Whenever capex rises, it is wise to dive in and assess the risk that it is excessive—that companies are overshooting and overestimating future demand and revenues, which could force them to cut back. That is usually where recessions come from. We don’t view this as an imminent threat in the data center world, given the demand looks to be there for now, but we are watching closely.

Why doesn’t the US’s high federal debt appear to be affecting the market?

Good eye. We see a few reasons. One, it is too widely known—markets move most on surprises, not slow-moving things everyone knows about. The Congressional Budget Office and other outlets have forecast high-and-rising US debt for many, many, many years. Two, US debt is still quite affordable, as we wrote at more length here. Debt service costs take up about as big a share of tax revenues as they did in the 1980s and early 1990s, basically economic and market boom times. Markets know this, even if headlines don’t.

If inflation is higher than estimated GDP growth is that a recession indicator?

Yes and no. It depends on which measure of GDP growth we are talking about. If inflation exceeds nominal GDP growth, then that generally means GDP is contracting once you adjust it for inflation. A sustained drop in inflation-adjusted GDP is generally evidence of a recession. But if inflation exceeds “real” or inflation-adjusted GDP growth, that is mostly just trivia. It happens plenty, and markets often do fine.

What impact will [the extreme faction of a political party I don’t like] have on markets?

The bit in brackets here was more specific, but we took some editorial license to make it more generic because we have seen this question from readers on both sides of the aisle, nice folks who are worried about what they perceive as scary elements in the opposition party gaining mainstream clout and legislative influence. Our answer is the same regardless of which side is asking, and the point is important and timeless.

And that answer: Probably zero impact. Markets move on policies, not personalities, and to the extent the more radical elements of a given party have influence on policies, the legislation generally gets discussed to death well before it passes. That gives markets ample time to assess its effects, digest worst-case-scenario fears, and move on. Whatever passes tends to be very, very watered down from what the more extreme folks proposed on podcasts and campaign trails, giving markets happy relief.

But generally speaking, the more extreme wings of both parties tend to get sidelined in the House and Senate. These folks talk a lot, and cable news and podcasts hype them to kingdom come, but that is all for social media, clicks and ratings. Note, too, that it is very often the other side’s talking heads that tend to hype these extreme wings, which strikes us as an attempt to scare viewers into keeping the tv on and donating to the station’s preferred candidates. When you see your favorite talking heads doing “reaction videos” to something someone on the other side said, consider that talking heads on the other side are probably making similar “reaction videos” about someone on your own side that you consider an absolute wingnut and whom few listen to.

Our friendly suggestion is to simply opt out of that ecosystem.

Are you bullish or bearish on pumpkin spice lattes?

60% of your friendly editorial staff are bullish on them. 40% are bearish and think they are undrinkable abominations that shouldn’t exist. Relatedly, 40% of us are correct, though we don’t judge, and readers with either preference are most welcome here!