The third quarter of 2026 presented investors with a mixed environment shaped by two major forces. Interest rates climbed to their highest levels in 20 years, while strong corporate earnings continued to support stock prices. Oil prices rose above $100 per barrel, the Federal Reserve raised its key interest rate for the first time in three years, and concerns about artificial intelligence (AI) grew as November’s midterm elections approached.
Despite this backdrop, major U.S. stock market indexes ended the quarter close to their all-time highs. Gains were spread across multiple parts of the market, including energy stocks, international stocks, and commodities. While rising interest rates have been challenging for bonds, bond yields are now at their most attractive levels in years.
These results highlight an important principle of long-term investing: different investments respond differently to changing conditions. Maintaining a diversified portfolio, built on research and designed to support a thoughtful financial plan, can help investors navigate uncertainty without relying on predictions about what comes next.
One of the most significant developments of the quarter was the sharp rise in interest rates. After decades in which rates generally trended downward, investors are now navigating a very different environment.²
Higher rates have created challenges for bonds, particularly those with longer maturities, as existing bond prices typically fall when interest rates rise. At the same time, higher yields mean newly issued bonds can offer more income than they have in many years.
The effects extend beyond investment portfolios. Mortgage rates have climbed above 7%, making home purchases and moves more expensive and contributing to a slowdown in the housing market.³
These changes reinforce the importance of viewing investments within the context of a broader financial plan. A well-constructed portfolio considers not only current market conditions but also an investor's goals, income needs, and time horizon.
Despite short-term ups and downs, the S&P 500, Nasdaq, and Dow Jones all reached new all-time highs during the third quarter. A healthy economy and growing investment in AI technology have helped companies earn more money.4
The gains were not limited to large U.S. companies. Smaller companies and international markets also benefited from AI-related demand.5 Commodities also rose sharply, with oil climbing from around $70 per barrel in early July to over $100 in September due to ongoing conflict in the Middle East.
This broad participation across asset classes shows why having a diversified portfolio, one that spreads investments across different types of assets, is so valuable.
In September, the Federal Reserve raised its benchmark interest rate by one-quarter of a percent, bringing it to a range of 3.75% to 4.00%. This was the first rate increase in three years, coming after a series of rate cuts from September 2024 to December 2025.6
The Fed raised rates mainly in response to higher energy prices pushing up inflation. This is known as “cost-push inflation,” which happens when supply disruptions cause prices to rise.
Although interest rate changes can influence borrowing costs, consumer spending, and investment returns, they do not determine market performance on their own. Historically, rising interest rates and rising stock markets have sometimes occurred together, particularly during periods of economic strength.
For investors, the focus remains on understanding how changing rates affect their financial plans rather than attempting to anticipate each decision by the Fed.
Elections shape important policies, but history suggests investors should be careful about making major portfolio changes based on election outcomes. The S&P 500 has averaged annual total returns of 8.6% in midterm election years since 1933, and markets have generally performed well across many different political configurations in Congress.7 It is also common for the sitting president’s party to lose its majority in Congress during midterm elections, as happened under Biden, Trump’s first term, Obama, and Clinton, among others.8
Another concern for many investors is the size of the national debt. The total federal debt recently exceeded $40 trillion for the first time, which works out to nearly $120,000 per American.9 The annual budget deficit is projected to be above $2 trillion for the government’s 2026 fiscal year.10
While these are genuine long-term challenges, the most important thing for investors is to hold a well-balanced portfolio that can hold up across different economic and political environments, rather than trying to predict specific political outcomes.
AI has been one of the biggest drivers of stock market performance in recent years, benefiting groups such as the Magnificent 7. The chart above shows how much faster the Information Technology sector has grown its earnings compared to the other ten S&P 500 sectors.11 While this concentration in a few large technology companies is something to be aware of, other sectors have also performed well. The energy sector, for example, is the top performer year-to-date with a gain of 37.4% through the third quarter, driven by higher oil prices.
A key question going forward is whether AI will lead to lasting improvements in productivity, meaning whether it will help businesses and workers get more done. So far, the 2020s have seen average productivity growth of 2.1% per year, compared to only 1.2% in the 2010s. Whether these improvements continue remains uncertain, but they could have meaningful implications for businesses and the economy.
Rather than trying to predict which companies or sectors will benefit most, investors can maintain exposure to a broad range of opportunities through a disciplined, diversified approach.
The third quarter of 2026 brought higher interest rates, continued inflation concerns, and shifting market leadership. Yet stocks reached new highs, corporate earnings remained strong, and different asset classes continued to offer opportunities for investors.
The quarter also reinforced why diversification and long-term discipline matter. Market conditions will continue to change, often in ways that are difficult to anticipate. A well-designed financial plan and an evidence-based investment strategy are built with that uncertainty in mind.
By keeping your investments aligned with your goals, time horizon, and broader financial life, you can approach changing market conditions with greater clarity and confidence.
1. Return figures represent total returns with reinvested dividends. All figures as of September 30, 2026
2. Clearnomics research using Federal Reserve data, as of September 30, 2026
3. https://www.freddiemac.com/pmms
4. Clearnomics research using LSEG data, as of September 30, 2026
5. Clearnomics research using FTSE Russell and MSCI data, as of September 30, 2026
6. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
7. Clearnomics research using Standard & Poor’s data, as of September 30, 2026
8. Clearnomics research using Standard & Poor’s data, as of September 30, 2026
9. https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/
10. Clearnomics research using LSEG and Standard & Poor’s data, as of September 30, 2026
11. https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/ https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/
S&P 500
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The modern design of the S&P 500 stock index was first launched in 1957. Performance prior to 1957 incorporates the performance of the predecessor index, the S&P 90.
Dow Jones
The Dow Jones Industrial Average consists of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
NASDAQ
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
MSCI Emerging Markets Index
The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia. The MSCI EM Index consists of the following emerging market country indices: Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa, Turkey, United Arab Emirates, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.
MSCI EAFE Index
The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.
Bloomberg US Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.
Copyright (c) 2026 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
Apella Capital, LLC (“Apella”), DBA Apella Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Apella Wealth provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted.