Bloomberg Surveillance · Friday, September 11, 2026
David Kelly advises that if the Federal Reserve hikes rates, investors should consider backing away from the most expensive U.S. equities. He explains that high Price-to-Earnings ratio stocks are particularly vulnerable to rising long-term interest rates, and suggests reallocating to value equities, U.S. medium and small-cap stocks, and international equities.
“I will back off on the most expensive equities in the U.S. Yes, I think it's... You always have to think about... I'm not trying to do a tactical timing here, but I do think that the most expensive equities are... They are essentially discounted by a long-term interest rate. And if the Fed hikes next week, my view is that pushes up long-term rates. And if it pushes up long-term rates, it is negative for... long-duration equities, which are those which have the highest P.E. ratio.”
“So, I would redistribute. I think there's plenty of opportunities in value equities, in medium and small-cap equities in the United States, in international equities outside of some E.M.”