Higher interest rates failed to spoil another week of equity-market gains, while sector leadership reflected the market’s adjustment to a rising-yield environment. With third-quarter earnings season set to take center stage, investors will be looking for corporate results to justify the market’s continued optimism. For now, our technical gauges remain favorable, keeping us disciplined, optimistic, and fully invested.
Wall Street reached new highs this week, but the mood elsewhere was less cheerful. The S&P 500 and Nasdaq set records while small-cap stocks lagged, consumer confidence weakened, and Delta Air Lines lowered its profit outlook despite strong travel demand. The Fed, meanwhile, signaled that it could wait before raising rates again, though inflation remained a concern. Strong corporate earnings continue to support the market, but rising costs are making that strength increasingly uneven.
The Weekly Scoreboard
The S&P 500 gained 1.2% for the week, while the Dow rose 0.9% and the Nasdaq added 0.6%. The Russell 2000 moved in the opposite direction, falling 0.9%. Both the S&P 500 and Nasdaq reached record closing highs Tuesday before retreating midweek and recovering Friday.
Treasury yields finished lower after a volatile week. From Friday to Friday, the two-year yield declined 3 basis points to 4.80%, the 10-year fell 4 basis points to 5.24%, and the 30-year eased 3 basis points to 5.60%. Long-term yields nevertheless reached multidecade highs during the week, keeping borrowing costs firmly in focus; long–term Treasuries have lost 7.2 on the year.
Gold recovered from a two-month low to close at $4,220 per ounce. Brent crude settled at $104.72 a barrel as tensions involving Iran and supply disruptions in the Gulf of Mexico continued to influence energy markets.
A Pause Is Not a Pivot
Wednesday's September FOMC minutes confirmed that policymakers unanimously supported the recent rate hike, though their reasoning differed. Many saw higher rates as insurance against persistent inflation, while others thought further tightening was necessary given their central economic forecasts. Most still expected another increase before year-end.
The more interesting distinction was in financial conditions. Despite elevated Treasury yields, Fed officials noted that financing remained relatively accessible for larger businesses, while mortgage borrowers and smaller companies faced tighter conditions. Higher rates are clearly affecting parts of the economy, but they haven't constrained everyone equally.
Officials also highlighted rising energy costs and investment in AI infrastructure as potential sources of inflation pressure. The Fed may have room to pause in October, but the conditions that prompted September's hike have not disappeared.
Strong Markets, Unhappy Consumers
Friday's preliminary University of Michigan survey offered a less encouraging view of the economy. Consumer sentiment slipped to 46.3 in October from 48.1 in September, while the current economic conditions index fell more sharply, from 50.9 to 44.7. One-year inflation expectations rose to 4.7%.
The contrast with record stock prices is striking. Households with substantial financial assets have benefited from market gains, while lower-income consumers and those with smaller portfolios remain more exposed to rising living costs. The stock market's strength is not being felt equally.
Delta Air Lines offered a corporate example of the same pressure. Despite record September-quarter revenue, up roughly 16% from a year earlier, the airline lowered its 2026 adjusted earnings forecast to $5.10–$5.60 per share from $6.50–$7.50. Delta now expects its annual fuel bill to rise approximately $6 billion from last year. The company has raised ticket prices by roughly 20% this year, but higher fares have not fully offset rising costs. Delta's experience illustrates a challenge that could become more visible this earnings season: strong demand can support revenue without delivering comparable profit growth.
The Week Ahead
Next week brings two important tests of market resilience: inflation data and corporate earnings.
Wednesday's September CPI report will help shape expectations ahead of the Fed's October 27–28 meeting. Producer prices and retail sales follow Thursday, offering further evidence of whether higher costs are reaching consumers and whether spending remains resilient.
Major banks also begin reporting. JPMorgan, Goldman Sachs, Citigroup and Wells Fargo release results Tuesday, followed by Bank of America and Morgan Stanley Wednesday. Investors will watch credit quality, lending activity, and funding costs for signs of how higher rates are affecting the financial system.
Expectations are high. Analysts project S&P 500 third-quarter earnings growth of approximately 30.6%, but roughly two-thirds of that increase is expected to come from technology and major AI-related companies. Strong aggregate earnings may therefore conceal considerable differences across industries.
After another week of record highs, the question is no longer simply whether companies can grow. It is whether that growth can remain broad and profitable enough to justify valuations while financing and operating costs stay elevated.
“In a high-cost environment you cannot grow your way out of it.”
—Ed Bastian, CEO of Delta Air Lines, October 9, 2026
Perspectives by Phil Wool
Crunching the Numbers on Post-Midterm Stock Performance
“Investors who focus solely on red or blue can miss out on the green.”
—Mark Hulbert, financial analyst and founder of Hulbert Ratings
In a matter of weeks, Americans will head to the ballot box to vote in midterm general elections, with both chambers of Congress up for grabs. For those of us being inundated for the last month with overly dramatic TV attack ads, mailboxes full of junk fliers, and an endless barrage of spam text messages, the first Wednesday in November is going to come as some kind of a relief regardless of who wins. As the days tick down to polls opening, rather than worry about how voters should be reasoning through this election’s major issues—professional pundits and armchair analysts are doing plenty of that elsewhere—I want to spend just a little time thinking about what the implications of the midterms could be for our clients’ portfolios.
Of course, that’s not to say politics and economics don’t intersect. Whether or not Democrats manage to flip the House and Senate and take over the legislative branch could obviously have big implications for U.S. policy in the final two years of the Trump White House, and that, in turn, could clearly influence the macroeconomy, as well. The problem is that outside of trading in prediction markets—where one can make a direct bet on the outcome of an election—even knowing exactly how the voting was going to play out in advance, there’s no guarantee we would be in a better position to profit from it in our portfolio. If you don’t believe that, it’s worth taking a look at the chart below, where we’ve plotted S&P 500 Index returns over the 12 months beginning in the November of a midterm election and ending the following October, going back to the 1946 cycle.
Interestingly enough, we find the best performance for U.S. stocks accrued in the wake of the '54 midterms. Those elections took place two years into Republican President Dwight Eisenhower’s first term, with Dems pulling off exactly what they’re aiming to do this year, gaining enough seats to win back majorities in both the House and Senate. Over the next 12 months, the S&P 500 climbed by over 33%. That was quite a departure from the worst post-midterm returns, which came two cycles prior, when Democratic President Harry Truman’s party lost both chambers of Congress—in which they had held majorities since 1932—and stocks advanced by a relatively meager 4% over the next year. Two momentous midterms, two very different results.
Looking at the bigger picture, though, one finds there’s reason to be positive headed into this November’s election. It turns out that if we only count performance over these post-midterm windows, from 1946 through 2023, the S&P 500 posted an average return of more than 17.5%, which was more than double the 7.3% average return for U.S. stocks in non-midterm years. Average returns are only modestly lower when the White House loses seats in both chambers, and just a little weaker still in years that featured particularly bad performance in the House for the incumbent party (either of which could easily happen this cycle). On the flip side, stocks have tended to do just a little better when a Republican president is in the White House, and have also outperformed when midterms fall in a president’s second term (both of which are definitely the case this November).
There’s a popular explanation for the apparently superior post-election performance in midterm years: The market—much like those of us suffering campaign ad fatigue—breathes a sigh of relief once the votes have been counted and we know the outcome. That’s because until ballots are cast and the polls close, we’re living under a cloud of political uncertainty, which is something stocks really don’t like.
We also know that markets are continuously weighing and discounting the odds of every midterm scenario long before the voting happens, not to mention every other factor likely to affect U.S. companies’ future cash flows. And while post-midterm policy might impact stocks, the market is surely attuned to the macroeconomic situation leading up to the election, making it easy to confuse cause and effect. In that 1946 race, for example, where Truman’s party lost its majority, voters were reacting to a war-related overhang of economic hardship, which must be partly to blame for stocks’ lackluster performance. Likewise, in the 1954 election, stocks’ stellar returns probably had less to do with investor sentiment toward Congress and were more the result of an historic post-war economic boom and bull market run, which saw the DJIA finally top its prior peak—a high-water mark set just before stocks crashed in 1929.
At the end of the day, we recognize that it’s not only hard to predict exactly what will happen when voters show up in a few weeks, it’s also difficult to sort out how an election will impact stocks independent of the many other influences that will determine whether the next year’s returns tend toward the bottom or top of the historical range in the chart above. The data do suggest that, even though there can be a strong temptation to put on one’s political pundit hat around events like this and call the outcome, it’s probably wise not to try to time the market based on those predictions. It’s fine to look at who controls Congress as an input to regulations and other policies that would affect specific investments—and certainly as something that would impact tax planning—but we expect longer-term broad market returns are more influenced by valuations and bigger macro themes than Congress can hope to dictate.
Rayliant Disclosure
Disclosure: This material is for informational purposes only and should not be considered investment advice. An investor should consult with their financial professional before making any investment decisions. The opinions contained herein are subject to change without notice and do not necessarily reflect the opinions of Rayliant Investment Research. Indices cannot be invested in directly and are unmanaged. Past performance is not indicative of future results.
Sowell Disclosure
Disclosure: This material is for informational purposes only and should not be considered investment advice. An investor should consult with their financial professional before making any investment decisions. The opinions contained herein are subject to change without notice. Indices cannot be invested in directly and are unmanaged. Past performance is not indicative of future results.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
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WEEK AHEAD
October 12-16, 2026
Higher interest rates failed to spoil another week of equity-market gains, while sector leadership reflected the market’s adjustment to a rising-yield environment. With third-quarter earnings season set to take center stage, investors will be looking for corporate results to justify the market’s continued optimism. For now, our technical gauges remain favorable, keeping us disciplined, optimistic, and fully invested.
Weekly Market Commentary:
A Rising Market, a Narrowing Margin for Error
The Weekly Scoreboard
A Pause Is Not a Pivot
Strong Markets, Unhappy Consumers
The Week Ahead
Perspectives by Phil Wool
Crunching the Numbers on Post-Midterm Stock Performance
“Investors who focus solely on red or blue can miss out on the green.”
—Mark Hulbert, financial analyst and founder of Hulbert Ratings
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.