Hello everyone, welcome back to the U.S. stocks analysis channel — I'm lorder. It's Friday evening, September 11, 2026, Eastern Time. The four major indices bounced higher today, and most sectors closed in the green. Communication services, tech, and consumer discretionary were solid, while utilities, healthcare, and energy lagged. There wasn't much to highlight market-wide today, so let's briefly walk through the economic data and macro picture — especially a Capital Economics report on the AI bubble that everyone's been concerned about. They lay out five warning signs for us to consider. We'll also check in on the Philadelphia Semiconductor Index, SOXX, because it's come back to a key level.

Let's start with the bottom line: our stance is watch-and-wait, neutral to cautious. We're in the window ahead of the rate decision. Higher inflation data has pushed the odds of a hike next week sharply up, but fiscal deficit and interest-expense pressure put a real constraint on policy room. The Philadelphia Semiconductor Index closed higher on the day, but it's still below the downtrend line and inside a direction-selection window. Capital Economics flags a medium-term risk of the AI bubble bursting — though it probably won't pop this year.

First, the data. August core CPI rose 0.3% month over month, above the 0.2% expected. Year over year, the increase eased to 2.4%, below the prior 2.5%. Headline CPI rose 0.4% month over month, notably faster than the prior 0.1%, and it held at 3.4% on a year-over-year basis. Supercore CPI month over month went from 0.2% to 0.5%, while core services CPI ticked up slightly.

Core CPI coming in above expectations pushed the market's probability of a 25-basis-point hike next week straight to 86.5%. It looks like the market thinks the Fed will hike next week — but wait until you see August's spending and interest figures in a moment, and you'll understand how hard this is for the Fed Chair. If they really do hike next week, that interest-expense number is going to look extraordinary.

Another data point: the September University of Michigan consumer sentiment index fell from 51.7 to 47.8, below the 51 expected. One-year inflation expectations rose from 4.0% to 4.6%, and five-year expectations moved up to 3.4%.

Now the fiscal side. August's budget deficit was $166.8 billion. For the first 11 months of fiscal 2026, the total deficit has reached $1.97 trillion — that's 19,700 in hundred-million units — and we expect the year to end with a deficit about $200 billion above last year's, making it the third-highest deficit year in history, behind only 2020 and 2021.

On interest: August alone racked up $98 billion in interest expense. The fiscal year-to-date total is $1.267 trillion — 12,670 in hundred-million units — up 12% year over year. Trailing 12-month rolling interest expense stands at a record $1.4 trillion (14,000 hundred-million units), and by end-2028 it's projected to exceed Social Security spending — which is running at a rolling $1.66 trillion (16,600 hundred-million units).

One-line summary: inflation is hard to contain, the fiscal picture is deteriorating, interest costs are snowballing, and the Fed really has very limited room.

First, SOXX. It's trading at $527, right around the downtrend line. That line has been declining over time. This week, SOXX closed up 1.86%, but the price is again stuck at the trend line without a breakout. We're now in a potential breakout window. If it pushes higher next week, you could see technical strength; if it opens lower and fades, it keeps its downtrend pressure. So the strategy here is to stand aside and wait for confirmation of a breakout.

On the S&P 500, forward P/E is around 21x. Valuation has pulled back from its peak, but earnings expectations and concentration are at extreme levels, so the medium-term outlook remains cautious.

Worth a note on technicals vs. fundamentals: technicals can sometimes run detached from fundamentals — overvalued assets can stay overvalued, undervalued ones can stay undervalued — but in the long run, mean reversion still applies. After the pullback in the Philadelphia Semiconductor Index's components, valuations have become more reasonable — take AMD, Broadcom, and Marvell — and on top of a technical breakout, there could still be speculative room.

Let me take the risks seriously here.

First, the U.S. fiscal deficit continues to deteriorate, with interest expense snowballing into a vicious cycle of borrowing new debt to repay old debt, squeezing out other government spending.

Second, inflation is hard to suppress given high oil prices. Even if the Fed doesn't hike next week, further hikes are likely hard to avoid later.

Third, Capital Economics sees a bleak medium-term outlook for the AI bubble. The risk of a stock-market bubble bursting could show up sometime between next year and end of next year, but it most likely won't burst this year.

Fourth, if the semiconductor index fails to break above the downtrend line next week, it may continue to weaken — the direction-selection window has arrived.

Fifth, the market overall lacks catalysts and has no clear trend. Investors shouldn't be making aggressive decisions right now; better to wait for the Fed's meeting outcome and the semiconductor index's directional choice.

Quick summary: CPI is elevated, hike odds have spiked, fiscal deficit and interest-expense pressure are enormous, consumer sentiment is deteriorating, the semis are pinned at a critical trend line, and there are medium-term warning signs around the AI bubble. The market has no clear direction, so cautious patience is the safer choice. See you next time.