2026 Market Commentary
Stocks have continued to climb this year. Through Friday, October 23, the S&P 500 Index (large US companies) gained 12.40%, and global stocks, as measured by the MSCI ACWI All Cap Index, rose 11.41%.
Bonds have had a tougher time. When interest rates rise, the value of existing bonds falls, and with the 10-year US Treasury yield climbing from about 4.7% last quarter to roughly 5% today, global bonds (as measured by the Bloomberg Global Aggregate Bond Index) are down 1.59% for the year.
The silver lining is that new bonds and savings vehicles are paying more than they have in years, and we continue to spread bond holdings across a mix of short- and longer-term maturities.
Beneath the Surface
The headline numbers don’t tell the whole story. The S&P 500 has mostly moved sideways since early August, held back by high oil prices and interest rates, and many individual stocks have fared worse than the index suggests.
Among roughly 1,500 US companies of all sizes, about 46% are trading more than 20% below their highs. A handful of areas have held the market up: large technology companies, energy companies, and steady businesses like health care and consumer staples. Companies more sensitive to the economy and borrowing costs have struggled.
Much of this split comes down to artificial intelligence. The market has increasingly divided into AI-related stocks and everything else, with the two groups often taking turns: technology up and most other areas down one day, the reverse the next. Roughly one in five S&P 500 companies has actually tended to move in the opposite direction of
the overall index over the past year, which is highly unusual. For us, it’s a strong reminder of the value of diversification, so that no single theme drives your results.
The good news is that the economy itself remains on solid footing. Business investment, much of it tied to AI, is helping fuel growth, and the economy is growing faster than the government’s cost to borrow, generally a sign of underlying strength. There are some cracks among companies carrying heavy debt, but larger, financially sound companies remain healthy.
With that in mind, Raymond James favors leaning toward high-quality companies with strong balance sheets and steady earnings, and away from the market’s most volatile, fast-moving stocks.
Beneath the Surface
Coming out of our most recent meeting with Ned Davis Research, the message was something of a split decision. NDR’s main model remains very positive on stocks, but they shared several reasons for caution.
First, it’s a midterm election year, and the months leading up to a midterm have historically been a rougher stretch for stocks. The good news is that the year after has tended to be strong: according to U.S. Bank, stocks have averaged a 12.4% return in the 12 months following a midterm election.
Second, investors may be a little too optimistic. Investor mood often works in reverse, and when nearly everyone is upbeat, there’s more room for disappointment, particularly if the Iran conflict and the effective closure of the Strait of Hormuz drag on.
NDR updates its views regularly, and we’ll keep watching closely and adjust our approach if their outlook shifts.
To see more articles from our Fall 2026 newsletter, please click here.
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