Recent Markets: Q3 2026
The third quarter saw a divergence of returns. Continued strength in AI propelled mega-cap tech stocks, while elevated borrowing costs weighed heavily on the broader U.S. market. For the quarter, the Nasdaq rose 2.5% and the S&P 500 index gained 2%, while the DOW Jones Industrial Average dropped -2.7% and the small-cap Russell 2000 index fell -7.5%. Foreign markets were mixed, with returns ranging from -0.8% to 1.9% for the quarter. On a year-to-date basis, stocks overall are generally showing solid returns.
Bonds are showing negative returns for the year as higher yields have driven prices lower. For the year, short-term bonds are down about -0.5%, while intermediate-term bonds are down roughly -3%. The 10-year U.S. Treasury yield reached 24-year highs above 5.3% on October 5th.
The U.S. economy keeps chugging along. The Commerce Department raised its reading for annualized GDP growth in the second quarter to 2.2%, well above the 1.5% previously been reported. The numbers added to evidence that despite the uncertainty and constraints, like tariffs and high energy prices, the economy remains on solid footing.
High energy prices remain a key inflationary driver. In August the core price index rose by 0.3%, faster than the July readings. Major consumer corporations like Conagra warned that surging transportation costs will push inflation higher in the coming quarters.
Meanwhile, the U.S. labor market is showing some weakness. September payrolls fell short of analyst expectations and the national unemployment rate ticked higher, although it remains historically low at 4.2%.
For long-term investors, this uncertain environment reinforces the importance of investment discipline and a well-diversified portfolio. Markets will continue to present both opportunities and challenges, but we believe a thoughtful, long-term approach remains the best way to navigate them.
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