BNA Market Perspective: October 2026

September Recap & October Outlook

September is historically one of the toughest months for stocks. Stocks swung back and forth as interest rates climbed, and the S&P 500 slipped about 0.4% for the month. Still, it gained about 2% for the third quarter and is up roughly 12% for the year, on pace for a fourth straight year of double-digit gains.

Federal Reserve Update

At its September meeting, the Fed raised rates by 0.25% to 3.75%–4.00%, its first increase since 2023. The Fed cited that inflation remains elevated and an economy is still growing at a solid pace. Chairman Warsh has moved away from signaling future moves in advance, so upcoming decisions will depend heavily on jobs and inflation data.

What Rising Rates Mean for Bonds

Bonds had a tough September. When rates rise, the prices of existing bonds fall. With the 10-year Treasury yield jumping from about 4.75% to 5.29% during the month, the Bloomberg U.S. Aggregate Bond Index (the “Agg”) fell about 2.6% in September and is now down nearly 3% for the year. The upside is higher income. As bonds mature, the money is reinvested at today’s higher yields, which helps make up for short-term price declines.

Earnings Remain the Foundation

Corporate profits continue to drive this market. In the second quarter, 86% of S&P 500 companies beat expectations, one of the highest rates on record. Analysts expect 2026 to be the third straight year of double-digit earnings growth. AI investment is also paying off sooner than expected, and over the past year a growing number of U.S. companies have reported financial benefits from AI.

Looking Ahead to Q4

Past performance does not guarantee future results. However, history has typically favored the final stretch of the year. Higher rates, possible further Fed hikes, tensions in the Middle East and the midterm elections may bring volatility along the way. As always, staying invested, diversified and focused on your long-term plan is the best way to navigate it.