Forward Focus - October 2026

America's 250th birthday started the quarter, but the stock market blew out the candles after that. While the Nasdaq Composite Index and technology stocks continued to shine, the MSCI Emerging Market index, Dow Jones Industrial Average, Russel 2000 Index (small cap stocks) and the Barclays U.S. Aggregate Bond Index all posted losses over the last three months. SOURCE: Yahoo Finance, Morningstar

The Russell 2000 (small cap) index fell 7.5% during the quarter, impacted by rising interest rates, higher oil prices, and inflation uncertainty.

Almost half of the stocks in the Dow Jones Industrial Average have declined since June. Household names like Cisco, Walmart, and Sherwin-Williams lost between 6%-8% of their value, while Nike, Boeing, Home Depot, Caterpillar, and McDonalds each posted declines of greater than 10%.

The 10-year Treasury yield climbed from 4.4% in June to 5.3% near the end of September. This marked the highest yield going back almost 20 years. (For perspective, the 10-year Treasury yielded less than 1.0% in December 2020). The inverse relationship of yields and price, means bond prices fall when yields rise.

The overall bond market, as measured by the Barclay's U.S. Aggregate Bond index, was down 3.5% in the third quarter. Rising yields have a significant impact on borrowing costs. The average 30-year fixed mortgage is now above 7.5%! Competition may also lead to higher lending rates. Trillions of dollars of loans may be required to continue to finance both data center build outs and the ever-expanding U.S. government debt. The interest expense alone on the U.S. national debt is estimated to be over $1 trillion dollars annually, according to www.fiscaldata.treasury.gov. Therefore, both private and public borrowers may have to increase lending rates just to attract enough people willing to lend.

After much anticipation, the Federal Reserve raised rated by 0.25% on September 15th. That was the first hike in rates in over three years. In the months leading up to the Fed's decision, Gold jumped 15% from July 1st to August 24th before declining significantly to end the quarter. Gold still provided a 4% gain in the third quarter, but remains down year-to-date.

For the quarter, the best performing S&P 500 sectors were Energy, Technology, and Health Care, while the worst performing sectors were Utilities, Industrials, and Real Estate. After peaking at $105.83/bbl. just two weeks ago, Crude Oil ended the quarter at $90.42/bbl., almost $21/bbl. higher than three months ago. SOURCE: FactSet, MSCI, Standard and Poor's, JPMorgan Asset Management.