Stock Market Volatility in 2026: Why Now Is Still Not the Time to Sell

Key Takeaways

The S&P 500's record close is 7,798.99, set August 13; it ended September 29 at 7,683.69.
The 10-year Treasury yield touched 5.22% on September 25, near its highest level since 2007.
The Fed hiked to 3.75%-4.00% on September 16; markets price another hike at the October 27-28 meeting.
Chop, not a crash: the index spent September roughly 1-2% below its record.

The S&P 500 closed at 7,683.69 on September 29, 2026, about 1.5% below its all-time closing high of 7,798.99 from August 13. Four days earlier it had pulled within 0.7% of that record before sliding again.

That’s the whole story of this market lately: lots of noise, not much net movement. The index hit a record of 7,621 in June, slid more than 4% into mid-July on AI-spending doubts, then round-tripped the entire move by early August.

Since then, the headlines have piled up.

The Federal Reserve raised rates for the first time since 2023. An AI CEO’s call to slow down model development knocked chip stocks lower. And the 10-year Treasury yield pushed above 5% for the first time since 2007.

Every one of those gets people asking me the same question I’ve fielded since 2008: should I sell?

I’ve written some version of this post during the 2008 financial crisis, the March 2020 COVID crash, and the 2022 bear market. The trigger changes — mortgage-backed securities, a pandemic, inflation, and now AI-bubble jitters layered on a Middle East conflict — but my answer hasn’t.

Covered in this Article:

Why the Market Is Swinging Right Now

Four things are trading off the lead role this fall. None of them has knocked the index more than a couple of percent off its high yet, but together they explain the whiplash.

1. The AI-spending question

Investors keep asking whether the massive hyperscaler capex buildout will pay off fast enough to justify current valuations. That drove the June-to-July pullback and resurfaced around Meta’s disappointing late-July earnings reaction.

Nvidia’s August 26 blowout quarter, with revenue up 106% year-over-year, pushed back the other way. It gave the S&P and Nasdaq their best day since early August.

2. The Iran conflict and oil

The U.S.-Iran conflict over the Strait of Hormuz is now in its eighth month. The International Energy Agency has called it the largest supply disruption in the history of the global oil market.

Brent crude has swung between roughly $97 and $105 a barrel in late September, moving on every hint of a deal. Iran offered to reopen the strait within a week if the U.S. lifted its port blockade and sanctions. President Trump rejected those terms on September 28, though indirect talks through mediators are continuing.

3. The AI industry’s own “slow down” debate

On September 12, Anthropic CEO Dario Amodei published an essay called “We Must Pace the Frontier,” arguing AI labs should deliberately slow capability gains so safety work can catch up. OpenAI’s Sam Altman and Elon Musk both backed the idea within a day.

The market read that as bad news for the capex-fueled growth story. On September 14, Nvidia fell more than 3%, AMD dropped over 4%, and the Philadelphia Semiconductor Index lost roughly 5-6%.

The debate hasn’t gone away. OpenAI delayed a new model over safety concerns in late September, and AI executives were set to meet with the President and House Speaker Mike Johnson on September 29 to talk about guardrails.

4. The Fed and the bond market

The FOMC raised its benchmark rate 25 basis points to 3.75%-4.00% on September 16, citing inflation that hasn’t eased. Stocks dipped, then rebounded the next day as the market decided a well-telegraphed hike wasn’t the worst case.

The bigger story since then is the bond market. The 10-year Treasury yield briefly hit 5.22% on September 25, up from 3.97% when the Iran war began. Consumers now expect 4.6% inflation over the next year, according to the University of Michigan survey.

Higher yields matter for stocks because they raise borrowing costs and make “safe” bonds more competitive with equities. On September 29, a key consumer confidence reading also fell to a 12-year low, and the S&P dropped 0.8% that day.

Valuations are the one piece that looks calmer than the headlines. The S&P 500’s forward P/E sat around 19.1 in mid-September, below its 5-year average of 19.8, as earnings growth keeps catching up to prices.

I’ve Seen This Movie Before

In 2008, the Dow was in free fall. I remember writing that the urge to sell was strong, even as my own portfolio was down more than 30% that year.

In March 2020, it felt like the whole world was ending along with the market. In 2022, inflation and rate hikes ground the market down for months, not days.

Each time, the headlines said this time was different. Each time, staying invested — not timing a bottom perfectly, just staying in — worked out better than getting out.

That doesn’t guarantee it plays out the same way this time. But it’s the pattern I’ve watched across almost two decades and three very different kinds of crises.

What Not to Do

Selling during a drop locks in a paper loss as a real one. It also requires being right twice: you have to time the exit and the re-entry, and most investors (professionals included) aren’t consistently good at either.

Investors who sold during the 2020 COVID crash and waited for things to “feel safe” missed one of the fastest recoveries in market history. The S&P 500 round-tripped its entire pandemic loss in about five months.

This year’s own June-to-August round trip is a smaller version of the same lesson.

What to Actually Do When the Market Drops

Run the cash-needs test first. If you need the money in the next 1–3 years, for a down payment, tuition or a planned expense, it shouldn’t be fully in stocks to begin with. A downturn is a signal to get more conservative with that specific bucket, not your whole portfolio.

Keep contributing on schedule. If you’re dollar-cost-averaging into a 401(k) or IRA, a drop means your regular contribution buys more shares at a lower price. Stopping contributions during a dip is the opposite of buy low, sell high.

Rebalance instead of exiting. If a drop has pushed your portfolio out of your target allocation, rebalance back toward your target. That’s very different from abandoning stocks altogether.

Consider tax-loss harvesting, not a full exit. If you hold individual positions at a loss outside a retirement account, selling those specific losers can offset gains elsewhere while you stay invested. I cover the mechanics and the wash-sale rule on the capital gains tax page.

Check your concentration, not just your total balance. If a big chunk of your portfolio rides on AI-adjacent names, a volatility spike in that theme hits you harder than it hits someone with a diversified portfolio. This is a good moment to look at what you actually own.

Keep a cash cushion outside the market. A few months of expenses in a high-yield savings account lets you ride out volatility without selling stocks at a bad time to cover an emergency. With the Fed hiking, those accounts are paying more than they were a few months ago, too.

When Selling Actually Makes Sense

Selling isn’t always the wrong call. A few situations where it can be:

You hold a specific company facing real fundamental damage (not just a sector-wide selloff), and your original thesis no longer holds.
Your time horizon changed: retirement moved up, or you need the funds sooner than planned.
Your portfolio became so concentrated in one theme (AI infrastructure, your employer’s stock, crypto) that one sector’s swings can meaningfully affect your finances.

In all three cases, the trigger is a change in your own situation or the underlying company. It’s not the fact that the market had a rough week.

Looking Ahead to October and the Rest of 2026

The next Fed decision lands October 28. As of September 29, futures markets put the odds of another 25-basis-point hike at roughly three in four, and 16 of 18 FOMC participants had already pencilled in at least one more hike this year.

Inflation data between now and then will decide it. A softer-than-expected PCE reading on September 30 could take some of the pressure off.

The other things I’m watching:

Bond yields. If the 10-year stays above 5%, it keeps squeezing stock valuations and rate-sensitive sectors like real estate.
The Iran talks. A deal that reopens the Strait of Hormuz would likely pull oil lower fast. A breakdown could push Brent toward $120, a level Goldman Sachs has flagged as plausible.
The AI “pacing” debate. Whether the big labs actually slow down, and what Washington does about AI rules, could reshape the capex story. Congress leaves for recess until after the November 3 election, so any legislation is likely a 2027 story.
Third-quarter earnings. The big hyperscalers report in late October, and their capex guidance will move the AI trade either way.

None of these resolve in the next few weeks. I’ll keep this page updated as the picture gets clearer.

Mistakes I See Every Time the Market Gets Choppy

I get some version of these questions every time the market has a rough stretch:

Panicking near the bottom. The scariest days are often close to a local low, but you can’t know that in the moment. That’s why a pre-set plan matters more than a gut reaction.
Stopping retirement contributions. Pausing your 401(k) or IRA during a downturn means missing out on buying at lower prices.
Checking your portfolio daily. Frequent checking makes short-term noise feel bigger than it is and pushes people toward emotional decisions.
Confusing a sector wobble with a market crash. An AI selloff or a geopolitical headline isn’t the same as a recession signal. Check whether the pullback is concentrated in one theme before assuming it’s systemic.
Trying to time the exact bottom to buy back in. Missing just the 10 best market days over a decade can cut your total return roughly in half.

If the hype side of this market is what’s getting to you, I wrote a separate guide on how to invest without FOMO. For the spending debate behind the AI swings, see my primer on AI infrastructure investing.

Frequently Asked Questions

QShould I sell my stocks when the market drops?

AFor most long-term investors, no. Selling during a drop turns a paper loss into a real one and requires correctly timing both the exit and the re-entry. The exceptions are if you need the cash within 1-3 years, a specific holding has broken fundamentals, or your portfolio is dangerously concentrated in one theme.

QHow far is the S&P 500 from its all-time high?

ANot far. The record close is 7,798.99, set on August 13, 2026. The index closed at 7,683.69 on September 29, about 1.5% below that level, and it came within 0.7% of the record on September 25.

QWhy are bond yields rising, and does it matter for stocks?

AThe 10-year Treasury yield hit 5.22% on September 25, near its highest since 2007, on worries about inflation, expensive oil and large government debt. Higher yields raise borrowing costs and make bonds more competitive with stocks, which tends to pressure stock valuations.

QWhat's actually driving the market's swings right now?

AFour things: doubts about whether AI infrastructure spending will pay off, the U.S.-Iran conflict over the Strait of Hormuz and its effect on oil, the AI industry's own debate about slowing down development, and a Fed that is raising rates while bond yields climb.

QShould I stop my 401(k) contributions during a market downturn?

AI don't recommend it. Contributions made during a downturn buy more shares at a lower price, which is the whole point of dollar-cost averaging. Stopping locks in the 'buy high' side without the 'buy low' benefit.

QWhat is tax-loss harvesting and does it help right now?

AIt's selling an investment at a loss outside a retirement account to offset capital gains elsewhere, then usually reinvesting in something similar but not identical. It's one of the few moves that turns a downturn into a real tax advantage, but watch the wash-sale rule.

QWill the Fed raise rates again in October 2026?

AIt's likely but not certain. The Fed hiked to 3.75%-4.00% on September 16, its first hike since 2023. As of late September, futures markets priced roughly a three-in-four chance of another 25-basis-point hike at the October 27-28 meeting, depending on upcoming inflation data.