--- title: Quarterly Update author: Brandon Grundy, CFP® --- # Quarterly Update 06 Oct, 2026 The third quarter of 2026 (Q3) was solid for US stocks while it seemed like other asset classes could only go down. Some positive trends continued during the quarter and lifted portions of the stock market and economy. But negative trends like the Iran War’s impact on oil prices, bad breadth in the stock market, and interest rates continued to weigh on markets, especially bonds which saw their worst September in years. All told, diversification helped “moderate” portfolios remain about flat for the quarter.    Here's a summary of how major market indexes have performed during Q3 and this year, respectively. - US Large Cap Stocks: up 2.4% and 13.8% - US Small Cap Stocks: down 7.3% and up 15.1% - US Core Bonds: down 3.5% and 2.7% - Developed Foreign Markets: down 0.7% and up 14.9% - Emerging Markets: down 0.5% and up 11.1% A major driver of stock index performance continued to be the AI industry. Some analysts suggest that spending on AI-related infrastructure could hit $800 billion in the US and $200 billion overseas just this year, with more coming. To give this some scale, over the next several years estimated average annual spending on AI could be roughly 3x (each, as an inflation-adjusted percentage of GDP) of what was spent to build the interstate highway system and lay fiberoptics for the Internet, according to the Wall Street Journal. This spending will continue to move markets. AI-related companies make up much of the Technology sector and that sector is worth nearly 40% of the benchmark S&P 500 index. As of the end of Q3, Tech was up about 2.8% for the quarter but 36% YTD, so when Tech does well so does “the market”. But performance elsewhere has been uneven. The next best sector-level performance came from five of the eleven sectors, and each was up only single digits so far this year. Several sectors (Financials, Communication Services, Utilities, and Consumer Discretionary) were down a few percent or so YTD. Only one sector, Energy, outperformed Tech, and was up over 38% this year with nearly half of that gain coming during Q3. Energy only amounts to 3.5% of the S&P 500, so the sector’s performance didn’t move the needle as much as Tech. Another way to look at this is via market breadth, or how many stocks are advancing versus declining. As Q3 ended, only 10% of stocks in the S&P 500 were considered overbought while 57% were considered oversold, according to my research partners at Bespoke Investment Group. Breadth vacillates over time but doesn’t diverge like this very often. Small cap stocks and foreign stocks also had challenging quarters, while each has shown strong YTD performance. The main culprit was being more sensitive to rising oil prices, inflation and interest rates. Global oil benchmarks climbed over $100 per barrel again and ended Q3 in the $90-range. Among other things, this caused gas prices to rise more and diesel prices to hit record highs in the US and in foreign economies. Rising fuel prices and, perhaps ironically, increasing global economic growth, helped feed an inflation problem across much of the developed world. This led global central banks to turn more hawkish during Q3 with some raising their interest rate benchmarks in an attempt to slow growth. The US Fed raised its rate benchmark by a quarter point in September for its first increase since 2023. While highly anticipated, markets still reacted and impacts were larger the more sensitive the sector. The impact was probably felt most acutely in the bond market where bond prices had a bad September and a rough quarter as a whole. The US Aggregate Bond Index began Q3 slightly positive for the year, but prices trended down through July and August as concerns about inflation and Fed’s potential response grew. Falling bond prices caused the yield on the benchmark 10yr Treasury to rise from below 4.5% as Q3 began to about 5.3% as the quarter closed – a big move for bonds in a short time. As with stocks, more rate-sensitive bonds performed worse, such as prices on 20+yr Treasury bonds falling almost 9% during the quarter, and the Aggregate Index (about a 5-6yr average) falling 3.5%. Short-term Treasury bonds, such as 1-3yr, also fell but only by a quarter point. Currently, markets are assuming a 66% chance the Fed will raise rates again this year, likely at its December meeting, according to the CME Group’s FedWatch tool. Rising rates, whether from the Fed or via the bond market, dampen economic growth and markets quickly reset expectations, as we saw during Q3. Other impacts take longer to play out, such as from the average 30yr fixed mortgage rate now at nearly 7.5%, up over a percent in a year. On top of the general price inflation mentioned above, all this should eventually have an impact on the so-called wealth effect that drives excess consumption in our economy. Still, analysts suggest that our economy is growing fast enough to accommodate these changes, and they appear to be right so far. The Commerce Dept reports that consumer spending continues to rise, even when adjusted for inflation. This might be surprising given that other surveys show consumers having near-record low confidence in the economy. That odd combination has been lingering for a while.   As we move into Q4, the investment theme really isn’t that different from usual: ensure your portfolio is set up correctly and plan for any upcoming spending needs. You can trim stocks to generate cash or perhaps harvest some bond losses for tax and cash purposes. Also, rising rates might force some reshuffling but also create opportunities to put cash to work at higher rates, whether that’s via rebalancing or investing new money. Ultimately, maintain your plan and avoid making major changes based on headlines or other noise, because there’s sure to be lots of both. Have questions? Ask us. We can help. - [Quarterly Update](https://ridgeviewfp.com/index.php?option=com_tags&view=tag&id[0]=4:quarterly-update) ![](https://ridgeviewfp.com/media/yootheme/cache/c2/brandon_grundy-c28cb604.jpg) Brandon Grundy, CFP® Founder and Principal of Ridgeview Financial Planning ## Popular Articles [See all](https://ridgeviewfp.com/index.php?Itemid=117) ### [When Good News is Bad News](https://ridgeviewfp.com/index.php?option=com_content&view=article&id=57:when-good-news-is-bad-news&catid=8) 14 January 2025 Before beginning I have to take a moment to comment on the fires raging in SoCa… [Read more](https://ridgeviewfp.com/index.php?option=com_content&view=article&id=57:when-good-news-is-bad-news&catid=8) ### [Stashing Cash](https://ridgeviewfp.com/index.php?option=com_content&view=article&id=65:stashing-cash&catid=8) 22 October 2023 Over the past several weeks we covered a handful of year-end considerations wit… [Read more](https://ridgeviewfp.com/index.php?option=com_content&view=article&id=65:stashing-cash&catid=8) ### [Falling Consumer Sentiment](https://ridgeviewfp.com/index.php?option=com_content&view=article&id=51:falling-consumer-sentiment&catid=8) 25 February 2025 Good morning. 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