Q3 2026 Market Recap: Energy Up, Utilities Crushed, and Software Flipped | The Weekly Wrap

PayPal Holdings

• Steve Eisman · The Real Eisman PlaybookBearish

  Management should have accepted the $60 bid; PayPal's franchise value is obliterated by rivals.

  PayPal received an unsolicited bid at $60 and management rejected it as too low, which Eisman calls insane. The payments space has become notoriously difficult. PayPal competes against giants like Apple Pay and Google Pay, so he says its franchise value has been obliterated. The stock is now in the low 50s. He concludes management should have sold.

  “PayPal competes against giants like Apple Pay and Google Pay, its franchise value has been obliterated. Management should have sold, the stock is now in the low 50s.”at 16:15

Fair Isaac

Across the shows: 3 speakers in other episodes, 0 bullish and 2 bearish calls, past 30 days

• Steve Eisman · The Real Eisman PlaybookNeutral

  Covered his FICO short; bad news is largely out, though a counter-rally is possible.

  Eisman had been short FICO for a while. The stock was down 60% for the year. He still thinks more bad news could come. But a stock that has fallen that far that fast can rally on the slightest good news, and much of the bad news is already out. He says the better part of valor is to cover, so he did.

  “I think more bad news could still occur. However, when the stock goes down that much that quickly, the slightest good news can cause a counter rally.”at 19:39

Glasshouse Brands

• Steve Eisman · The Real Eisman PlaybookBearish

  Sold Glasshouse Brands after a steep decline and a CFO resignation; sensed something is wrong.

  Eisman sold his long position after a steep stock decline followed by the CFO resigning. The company says the resignation is as planned, but he asks why a CFO would plan to leave at the height of a growth story. He concludes that something is wrong. He also notes that when he becomes obsessed with a stock's daily moves, it is best to sell and perhaps come back later.

  “I sold my position after a steep decline in the stock followed by the CFO resigning. ... Why would a CFO plan to resign at the height of a growth story? Something is wrong.”at 20:06

Credit markets

• Steve Eisman · The Real Eisman Playbook

  Deeply distressed leveraged loans at the highest since the pandemic signal emerging economic stress.

  Eisman lists signs of economic stress. Deeply distressed leveraged loans have reached their highest level since the pandemic. Loans trading below 60 cents rose to $65B from $40B a year ago, and loans trading below 80 cents reached $140B, up 90% year over year. The technology sector has the biggest concentration of distressed loans at 39%, with software a big part of that.

  “Second, deeply distressed leveraged loans have reached the highest level since the pandemic.”at 3:22

Europe's economy

• Steve Eisman · The Real Eisman Playbook

  France's debt is dangerous at 120% of GDP with rising rates, so it no longer works as a safe haven.

  Eisman argues France is in trouble in the sovereign debt market, which had treated it as a safe haven. French debt-to-GDP has reached about 120%, which he calls a dangerous level, and French rates are rising. He sees zero consensus on the fix, citing Marine Le Pen's proposal to cut the retirement age to 60, which he says certainly won't help.

  “France was viewed as a safe haven, no longer. French debt to GDP has reached a 120%, a dangerous level and French rates are marching higher.”at 4:02

US deficit & government debt

• Steve Eisman · The Real Eisman Playbook

  US debt at 125% of GDP is not an immediate crisis because of reserve-currency status and Treasury demand.

  Eisman contrasts France, whose debt-to-GDP is about 120% and whose rates are rising, with the US at 125% debt-to-GDP. He argues the US is not in the same trouble, at least not yet, for two reasons. The US is the world's reserve currency, and the global financial system runs on Treasuries: the repo market uses only Treasuries, and large institutions park cash in them. Until there is a serious alternative to Treasuries, the US has the luxury of time, while France does not, since no one needs to own French sovereign debt.

  “By contrast, US debt to GDP is at a 125%. Now the reason why France is in trouble and The US is not, at least not yet, is twofold.”at 4:23

US Treasuries & yields

• Steve Eisman · The Real Eisman Playbook

  The 10-year yield's rise to 5.25% reflects AI debt crowding out Treasuries plus the September Fed hike.

  The 10-year Treasury yield rose from 4.5% to 5.25% during Q3, a very large move in a short period. Eisman attributes it to two things. First, AI debt issuance this year is about $500B, large enough to crowd out Treasuries. Second, war-driven oil prices pushed inflation risk higher, so the Fed raised rates in September for the first time in years as insurance against future inflation. The combination of AI debt issuance and Fed hikes pushed the yield to current highs. He notes higher rates raise federal debt costs, hurt housing, raise corporate borrowing costs including AI debt, and make consumer borrowing more expensive.

  “First AI debt issuance this year is around 500,000,000,000. That is large enough to have something of a crowding out effect on treasuries”at 5:29

US rates & the Fed

• Steve Eisman · The Real Eisman Playbook

  Higher rates are pushing the economy toward a breaking point, which he sees as getting closer.

  The Fed raised rates in September as insurance against future inflation, after war-driven oil prices lifted inflation risk. Eisman argues higher rates raise federal debt costs, hurt the housing market, raise corporate borrowing costs including AI debt issuance, and make consumer borrowing more expensive. Because of this, he believes the economy will eventually break under higher rates. He does not know when, but he says he is increasingly convinced it is getting closer.

  “At some point of higher rates, the economy breaks. What that point is? No one knows. But I'm getting convinced that we're getting closer.”at 6:29

US stock market outlook

• Steve Eisman · The Real Eisman Playbook

  S&P 500 no longer diversifies; AI exposure reaches 65%+ of the index, which makes him nervous.

  Infotech is now 40% of the S&P, and no sector has ever reached that level. Adding Google and Amazon takes it past 50%. Nvidia's market cap of over $5.5T makes it more than 8% of the index, larger than several sectors combined. Adding utilities, AI-linked industrials that build and power data centers, and financials that finance AI pushes AI-linked exposure north of 65%. Only staples and healthcare, about 14% of the index, have no AI link. Eisman says owning the S&P had been spot on advice, but the market has become all one trade, so it no longer provides diversification.

  “So we have to admit that investing in the S and P no longer provides diversification. It's mostly all one trade and to be perfectly frank that makes me nervous.”at 8:58

Oil & fuels

• Steve Eisman · The Real Eisman Playbook

  War-driven oil surge lifted energy stocks, but the sector is too small to matter to the index.

  The Iran war sent oil prices sharply higher, and traditional energy stocks, which make up most of the sector, are highly sensitive to oil. Energy was the best-performing S&P sector, up 16.5% for the quarter and 37% for the year, with Marathon and Phillips 66 up over 50% in the quarter. But energy is only 3.4% of the S&P. Multiplying 37.4% by 3.4% gives a contribution of about 1.3 points to the index's 11.8% gain over the first nine months.

  “The war in Iran has caused oil prices to surge and traditional energy stocks which make up most of the sector are highly sensitive to changes in oil prices.”at 10:38

Banks

• Steve Eisman · The Real Eisman Playbook

  Not ready to buy bank stocks; rising recession fears and rates typically hurt them.

  Large banks and investment banks outperformed in the first half on a strong economy and investment banking cycle. In Q3, war-driven recession fears and the September Fed hike raised credit cost fears, and bank investors hate rising credit costs. Goldman and Morgan Stanley and several regional banks fell over 10%, and the large banks are down over 20% from their June 30 to July 15 peak. Bank stocks had been at peak valuations, around 3x tangible book for Goldman and 4x for Morgan Stanley, so the only way to make money from there was for the investment banking cycle to stay very strong. Bank of America's CEO said higher rates hurt fixed income trading, which triggered the selloff. Eisman says bank stocks never do well when investors fear a recession, and that it is too early to buy.

  “I'm still not ready to buy bank stocks. If interest rates continue to march higher, fears of a recession will rise. Bank stocks never do well when investors are worried about a recession.”at 17:15

US housing

• Steve Eisman · The Real Eisman Playbook

  Rising rates have locked the housing market and hurt building suppliers.

  Mortgage rates have reached 7.5%, the highest since 2023. Eisman says rising interest rates have hurt the entire housing sector, which is a big part of consumer discretionary. The housing market is locked, and building suppliers are suffering as well. He cites this as the reason Home Depot fell 19% in the quarter.

  “Rising interest rates have hurt the entire housing sector, which is an important part of consumer discretionary. The housing market is locked and the building suppliers are suffering as well.”at 17:30

Power demand & the grid

• Steve Eisman · The Real Eisman Playbook

  Utilities fell on rising long rates and ratepayer backlash, despite their new AI-linked growth story.

  Utilities, usually a safety sector, have become quasi AI plays as they expand power for AI data centers, with about $250B of AI-driven capex this year. Still, utilities fell 13% in Q3 and 8% for the year. Many investors still buy utilities for dividends, and with long-term rates rising those dividends look less attractive. Fitch downgraded the North American utility outlook to deteriorating on ratepayer backlash. Regulators face political pressure to cap bill increases, raising fears that utilities cannot fully or quickly recover infrastructure costs. NRG, Edison and PG&E fell more than 25% in the quarter.

  “Despite the new AI narrative there is still a safety aspect to the sector. Many investors still buy utilities for their dividends and with long term rates rising those dividends look less attractive.”at 18:44