Q3 2026
Dear Client,
Welcome to Fall! It is a beautiful time of year here in the mountains. We are enjoying the cooler temps, a bit of rain, and of course the beautiful colors! Those factors, along with the feeling of impending winter, make it seem almost obligatory to spend as much time outside as possible. Meanwhile, we have also been doing our best to get housekeeping items in order as we near the end of the year. If you have outstanding RMDs, need to make retirement contributions, or have had any significant changes to your financial picture, please give us a call or email. We would be happy to arrange a time to talk, or meet (either in person, or Zoom).
The third quarter was not boring in the markets. We had a bit of everything: Macro-economic drama, earnings surprises, rallying and correcting equities, volatile debt markets, war and peace (ish), a blustering treasury secretary, and a reserved Federal Reserve Chairman. In the end the returns for equities were fairly muted, while yields set multi-decade highs. Here are the actual index changes for the quarter (calculated from www.stockcharts.com):
S&P 500 change: 2.31% Q3, 11.24% for the Year to Date (YTD)
S&P 500 Equal Weight Index change: -2.29% Q3, 8.57% YTD
Nasdaq Composite change: 3.16% Q3, 14.39% YTD
Nasdaq Composite Equal Weight Index change: -0.98% Q3, 16.41% YTD
Dow Jones Industrial Average change: -2.54% Q3, 5.82% YTD
Ten Year Treasury Yield change: 18.07% Q3, 27.2% YTD
Light Crude Oil Spot ($WTIC) change: 29.21% Q3, 57.5% YTD
Gold Spot ($GOLD) change: 3.71% Q3, -4.38 YTD
Takeaways include:
· Divergence between market-cap weighted indices and equal weighted indices shows resurgent strength of largest few companies.
· Nasdaq outperformance shows return to “Magnificent” 7/microchip stock leadership.
· Yields climbed strongly on inflation fears, and Federal Reserve rate hike.
· Oil price reflects continued war and disruption around The Strait of Hormuz, Bab al-Mandab, and in Russia.
· Gold had a relatively weak rally given all of the above, one perspective is that the higher yields offer an alternative.
Federal Reserve Chairman Warsh continued to speak strongly about his determination to fight inflation and made his first actual move in that direction. At the September meeting the Federal Open Market Committee voted unanimously to raise the Fed funds rate by .25% to a range of 3.75-4%. This was a reversal of the moves and rhetoric of 2025 and early 26, and in our opinion, a real acknowledgement of the problems we are facing with increased inflation. As we will discuss below, earnings are still very strong, and most economic measures seem healthy, so moving to fight inflation by raising rates a bit seemed reasonable. The decision was likely made easier by the strong “nudges” being offered by US and International bond market participants driving yields higher during the quarter. To us it seems easier to hike rates and then lower them again if inflation proves transitory, than to let it get out of hand again as it did in 2021-22. While the cause of the inflation is different this time, The Fed has limited tools available and using them seems wise when warranted.
Corporate earnings for the second quarter (Q2) continued the streak of blockbuster growth of the last few quarters[1]. Q2 finished with around 52% earnings growth for the S&P 500 companies in total and around 32% for the ex-Mag 7 companies (the other 493)[2]. These growth numbers are impressive and are overwhelming (for now) all other concerns in the markets. Clearly, this rate of growth can’t continue forever, but as long as earnings are growing at this torrid pace, the markets will likely follow.
During the quarter we dipped our toes into the bond market, as rates became attractive again. We also saw some attractive prices in equities as many stocks were moving inversely to the rise in interest rates. While we would prefer to see stocks go up, we certainly do our best to capitalize on opportunities presented by corrections.
We hope you all enjoy the rest of Fall and are looking forward to the holidays. We will be watching the markets and your accounts, so you can focus on other things.
Take care, Bo and Lesley
PS. Below, please see an alert we received from Schwab regarding scammers. If you have any doubt, don’t click or give any information. You can always give us a call to verify before acting.
We’ve also heard about very aggressive/predatory sales efforts from banks recently. Again, give us a call to discuss before you agree to anything. That’s what we are here for.
Fraud Alert: Beware of Scammers Impersonating Schwab Employees
A growing threat in the financial services industry involves fraudsters impersonating employees. We have had reports of bad actors purporting to be employees of RIAs as well as Schwab, including Schwab Fraud investigators, Schwab Security, Financial Consultants, or another internal Schwab team to obtain sensitive information, gain online access, capture authentication codes, or convince clients to move money. These schemes may include fabricated stories, realistic-looking websites or articles, spoofed phone numbers, urgent account warnings, and unsolicited links.
Recent Awareness
We have received reports of scammers calling clients while impersonating Schwab and asking them to "verify" suspicious transactions through links. Advisors should remind clients that Schwab will never ask them to confirm fraud through an unsolicited link, and we will not unexpectedly contact them to request online credentials, passwords, one-time passcodes, authentication codes, remote access to a device, or movement of funds to a "safe" account.
Key Messages to Share with Clients
Encourage clients to follow these best practices:
Verify independently by contacting Schwab or your office through a trusted number, such as the number on their statement, Schwab Alliance, or your firm's client portal.
Be cautious of unsolicited phone calls, emails, or text messages.
Do not rely on caller ID; phone numbers and names can be spoofed.
Never provide sensitive information, including Social Security numbers, dates of birth, account numbers, usernames, passwords, one-time passcodes, authentication codes, or verbal passwords.
[1] Factset S&P 500 Earnings Season Update: August 7, 2026
[2] XTB.com/int/market-analysis/news-and-research/wall-street-does-the-s-p-500-still-have-room-to-rise
