September 2026 Equity Valuations: Above Trend and Beyond Normal Bounds

Let’s look at the broad level graph of the monthly close for the Dow Jones Industrial Average over the last 10 years (as of September 11, 2026), as reported by MarketWatch.

Starting from the low observed on March 1, 2020, the DJIA stood at 21,917. The most recent value for DJIA as of September 11, 2026 is 52,573. The total return during this time is 140%, and if we were to annualize the return, you are looking at a rate of 18.6% (you calculate it by dividing the most current value by the previous value, and then raise the result to 1 divided by time in years, and then you subtract 1 from that result, and then you convert to percentage by multiplying by 100).

Doing the same for the S&P 500, we observed a similar elevated return profile.

Starting from the low observed on March 1, 2020, the DJIA stood at 2,584. The most recent value for DJIA as of September 11, 2026 is 7,656. The total return during this time is 196%, and if we were to annualize the return, you are looking at a rate of 20%. This is almost double the historical standard over the last 50 years. I intentionally anchored the analysis at the March 2020 COVID low because it captures the full effect of the fiscal and monetary interventions that reshaped the post‑pandemic market environment. While this starting point inflates returns relative to neutral baselines, it is appropriate for evaluating the consequences of policy actions on equity valuations.

If the S&P 500 had grown at its historical long-term rate of approximately 12%, the index would be around 4,600 today (=(1.12^6.534)*2,584). In other words, the S&P 500 is about 66% (=(7,656 – 4,600)/4,600) above where long-term historical compounding would place it. All this indicates that we are in bubble territory. The question then is not if there will be a reversion to the mean, but rather how that will manifest.

A word of caution is warranted: As J.M. Keynes stated, “markets can remain irrational longer than you can remain solvent.” Although we cannot pin-point the exact day that the mean reversion will occur, I do believe we can know the season (i.e. time range) when that will happen. We will explore that in a future post.