With oil above $100 a barrel, interest rates elevated, and the Federal Reserve potentially poised to raise rates, it is easy to see an S&P 500 near record highs as a market asking investors to take on too much risk.
Kevin Mahn, president and chief investment officer at Hennion & Walsh Asset Management, sees a different problem for long-term, buy-and-hold investors: moving to the sidelines to avoid a pullback and then missing the rebound. He spoke with TheStreet's Caroline Woods to explain his concern and discuss how he thinks smart investors should navigate current market conditions.
Mahn's case is not that volatility has disappeared. He expects it to persist as the Iran War, the Strait of Hormuz, inflation reports, and U.S. midterm elections keep investors on edge. His approach is to remain invested, stay diversified according to risk tolerance, and make selective decisions with new money rather than trying to predict the market's next down day.
Mahn's view comes with clear limits. He says a sustained move in oil above $120 a barrel or a 10-year Treasury yield above 5% would make him more concerned about the economic backdrop. Those are conditions he believes could pressure consumers, complicate the Federal Reserve's choices, and turn intermittent declines into a more serious correction.
Here is how Mahn separates normal volatility from a changing market outlook.
The strongest part of Mahn's argument against holding cash for an unspecified future dip is the asymmetry of market timing.
An investor who sells before a decline must make two good decisions: when to exit and when to return. The timing of an investor's return can be especially difficult because the market's strongest days may arrive during periods that still feel unsettling.
"We looked at the last 20 years worth of data. And what we found was that if an investor missed out on just the 10 best days in the market over those 20 years, their returns were cut in half. If they missed out on the best 30 days, their returns were reduced by 84%."
—Kevin Mahn, when asked whether it was still safe to put cash to work at current market levels
Mahn's point is counterintuitive because avoiding losses sounds prudent when headlines are worsening. Yet selling during a decline can mean an investor is absent when buyers return.
He also said that historically, the best days tend to follow the worst days. That historical observation does not guarantee that every selloff will reverse quickly, but it explains why he treats broad market timing as a high hurdle rather than a defensive default.
Mahn isn't alone in this line of thinking. According to Hartford Funds, 48% of the S&P 500's best days between 1996 and 2025 occurred during bear markets, or periods when stocks were broadly declining.
For long-term, buy-and-hold investors, staying invested does not mean ignoring risk. Mahn suggests holding a diversified portfolio that fits the investor's risk tolerance and adjusting it when circumstances justify a change. Diversification means spreading investments across individual holdings and broader categories so that a single company, sector, or market event does not determine your whole portfolio's outcome.
Mahn draws an important distinction between maintaining emergency savings and keeping a large cash balance in a portfolio because an investor expects stocks to fall. He said an emergency fund can be appropriate for unexpected personal circumstances, suggesting about six months of earnings in cash for that purpose. That money is intended to cover a household need, not to make a tactical bet on the next market move.
Cash held in a brokerage account specifically to buy stocks at lower levels serves another purpose entirely. Mahn acknowledges that an investor who already has cash may choose to deploy some of it after a substantial pullback. But he cautions that no one knows when the lower level will arrive. The practical question is whether the cash has a defined job in a financial plan or has become an open-ended wager that a better entry point must appear.
That distinction matters because an emergency reserve can prevent an investor from having to sell investments during a personal crisis. A large tactical cash position, by contrast, can leave an investor underinvested if markets recover before the hoped-for decline occurs.
Mahn's comments support a process in which a household first establishes the liquidity it needs, then decides how much market exposure fits its goals and capacity for losses.
Mahn is bullish over the long term, but he is not treating every risk as harmless. He said he would start to worry more if oil rose above $120 a barrel or if the 10-year Treasury yield moved above 5%.
The 10-year Treasury yield is the annual return investors demand to hold a 10-year U.S. government bond, and it is a widely watched benchmark for borrowing costs and valuation pressure across financial markets.
His reasoning on oil runs through the consumer. If oil remains above $120 a barrel for an extended period, he said, consumers could have less money available for other spending because gasoline costs take a larger share of household budgets.
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Mahn noted that consumers account for 70% of U.S. economic growth, so reduced spending could slow the economy. At the same time, persistent inflation could limit the Federal Reserve's ability to cut interest rates.
Mahn's concern about higher Treasury yields is related but distinct. A sharp increase in yields can tighten financial conditions, raising the hurdle for businesses and consumers that need credit.
He said a single 25-basis-point Federal Reserve rate hike, equal to one-quarter of a percentage point, would not by itself alter his strategy because markets may already be prepared for it. Repeated rate hikes or unexpectedly hawkish guidance, however, could change how he allocates money.
"The markets can absorb a 25 basis point rate hike. The markets are already absorbing where yields are right now."
—Kevin Mahn, when asked whether stocks could move higher if the Federal Reserve raises rates
Mahn's distinction is useful for investors who are tempted to treat any Federal Reserve hike as an automatic sell signal. A rate decision matters in context: whether it was expected, whether it changes expectations for later meetings, how bond yields respond, and whether inflation and economic activity are deteriorating.
His view is an opinion about the current setup, not a promise that stocks will rise after a hike.
A down day alone does not persuade Mahn that a lasting correction has begun. He expects periods when stocks decline, recover part of the loss as buyers step in, and then weaken again as geopolitical tension, oil prices, or uncertainty about Federal Reserve policy returns. In his view, that pattern can characterize a volatile market without necessarily signaling a prolonged downturn.
The pattern that would concern him more is two to three consecutive days of significant pullbacks, with each decline in a range of 1.5% to 2%, and with no buyers arriving to purchase the dip. He described that as evidence that money is not coming off the sidelines to support prices.
It's important to note that Mahn did not present this signal as a guaranteed forecasting tool. Instead, it is just one market-behavior indicator he watches alongside oil, yields, inflation, and earnings growth.
The phrase "buy the dip" also needs a limit. Buying a dip means adding money after a price decline in the expectation that a long-term investment case remains intact. It should not mean buying every falling stock automatically.
A diversified investor can use a planned schedule for contributions or rebalancing, while a more active investor needs to consider whether an individual position still fits their portfolio strategy and whether the risk of further losses is acceptable before adding exposure.
Mahn says he continues to follow spending connected to artificial intelligence infrastructure, the physical and digital systems required to build and run artificial intelligence tools. He pointed to Nvidia as a central company in that ecosystem and described demand for power, water solutions, aerospace and defense, and health care as related areas of opportunity.
His stock preferences are expressions of his investment view, rather than a list that will fit every investor.
His case for utilities is especially notable because the sector is often viewed mainly as a defensive place to seek dividends when markets become volatile. Mahn also sees utilities as a potential indirect beneficiary of artificial intelligence infrastructure because data centers require electricity. He said utilities have become more attractive after underperforming and sitting roughly flat, compared with their stronger performance in the prior year.\
"Utilities historically have held up well in the face of volatility. They generally pay good dividends to combat these higher bond yields right now, and they've also become a backdoor play into the AI revolution."
—Kevin Mahn, when asked where investors should look after oil approached $100 a barrel
Mahn mentioned the Utilities Select Sector SPDR Fund, known by its ticker XLU, as one way to gain diversified utility exposure. He also cited American Electric Power and said investors should consider utilities with nuclear generation, which he believes could become more important as electricity demand rises.
The trade-off is that a utility allocation is still an investment in stocks, not a substitute for a cash reserve or a guarantee against losses. Dividend payments can change, interest-rate moves can affect the sector, and the expected increase in artificial intelligence-related electricity demand may not benefit every company equally. Investors considering a sector position need to decide whether they want a broad fund, a smaller selection of individual companies, or no added concentration at all.
Mahn also sees an opening in bonds after yields rose. Bond prices and yields generally move in opposite directions: When yields rise, the prices of existing bonds typically fall, and when yields decline, their prices typically rise. That relationship can make newly lower bond prices more appealing to investors who expect yields to eventually come back down.
He said bonds could offer both potential total return, meaning price change plus interest income, and a coupon stream, the regular interest payments a bondholder receives throughout its term.
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The opportunity here rests partially on his view that yields will eventually decline. If yields rise further, existing bond prices can continue to fall, particularly for bonds with longer maturities. Bond investors, therefore, need to match the amount of interest-rate risk they take to the role bonds play in their broader portfolio.
For a long-term, buy-and-hold investor, that may mean considering whether higher yields improve the case for keeping bonds as part of a diversified allocation rather than treating bonds solely as a bet on the next Federal Reserve decision.
Mahn's broader message is consistent across stocks and bonds: The current backdrop may offer opportunities, but the portfolio should be built around timeline, goals, and risk tolerance rather than a single headline.
Mahn expects more short-term volatility and believes oil, yields, inflation, and the U.S. midterm elections could continue to keep markets unsettled.
His central warning is behavioral: Fear can push investors to abandon a longer-term plan at the moment when uncertainty is greatest and re-entry is hardest. His central caveat is equally important: A market outlook should be revisited if the evidence changes, particularly if oil stays above $120 a barrel or the 10-year Treasury yield rises above 5%.
A useful decision procedure starts with purpose. Keep emergency money separate from investment money. Confirm that your portfolio's mix of stocks, bonds, and cash fits your time horizon and ability to handle declines.
For new money, consider using a disciplined contribution or rebalancing plan (like dollar-cost averaging) instead of making an all-or-nothing call on the next market move. Then review whether a specific holding still has an investment case before adding to it after a decline.
This approach will not remove market risk, and it will not ensure that every dip becomes a buying opportunity. It does, however, address the risk Mahn emphasized: allowing an expected period of volatility to turn into an unplanned exit from a long-term investment strategy.
Disclaimer: Mahn's comments reflect his own market outlook and investment preferences. Investors should consider their financial circumstances, time horizon, diversification, and risk tolerance before acting on any market or sector view.
This story was originally published by TheStreet on Sep 11, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.