The third quarter of 2026 has seen a historic climb in interest rates, a new Federal Reserve rate hike cycle, and oil prices surging back above $100 a barrel. Given this combination of developments, many investors might have assumed that equity markets would struggle heading into year-end. Yet the S&P 500 notched its 27th record high of the year amidst continued strong corporate earnings, rewarding those who have been able to look past the headlines and remain invested.
In this article, James Liu, CEO of Clearnomics, walks through seven charts to help advisors put the quarter’s headlines into context for clients, from the historic climb in bond yields, to what resurgent AI-related spending means for corporate earnings and productivity.
Interest rates have been the biggest story of the quarter, with the 10-year Treasury yield touching 5.30% in September, a level not seen since 2002, while the 30-year reached 5.64%. Unlike 2022, when rates climbed largely due to runaway inflation (hurting stocks and bonds at the same time), today’s increases are being driven primarily by rising real (inflation-adjusted) yields – reflecting economic growth and heavy AI-related capital.
Inflation remains part of the picture as well, with headline CPI at 3.4% year-over-year and core CPI at 2.4%, both still driven largely by oil prices. This gave the Fed room to raise its target rate to a range of 3.75% to 4.00% in September – its first hike in three years – though new Fed Chair Kevin Warsh has also signaled a preference for stepping back from the central bank’s traditional practice of forward guidance.
Corporate earnings, meanwhile, have been equally strong this quarter. S&P 500 earnings grew approximately 29% year-over-year, a third consecutive quarter of growth above 25% and well ahead of the historical average of around 8%, with all 11 S&P 500 sectors posting gains rather than returns being concentrated in a handful of mega-cap technology names.
Read the full article at Kitces.com
