October Market Update

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Monthly Market Update

Market Indices Performance

Market Indices Performance as of 9-30-2026
Market Indices Performance as of 9-30-2026

 

September Recap

The S&P 500 fell 0.4% in September, a small drop considering roughly 75% of the stocks in the index declined and Technology was the one positive sector out of eleven.1,2 The tech-heavy Nasdaq was the only major index to finish the month higher.


The benchmark 10-year Treasury yield rose over half a percentage point from 4.75% to 5.3%.3 The increase was partially driven by a hawkish Federal Reserve which hiked the federal funds rate by 0.25% to the current range of 3.75%-4.00%.4


Inflation, measured by the Consumer Price Index (CPI), rose 3.7% year-over-year and 0.6% month-over-month. Higher energy prices led the increase, with gasoline prices being up 34% from last year and 9% from last month. Core inflation, which excludes volatile food and energy prices, rose 2.6%.5


The labor market cooled in September. Employers added 29k jobs (vs 89k expected), July and August’s reports were revised lower by 60k jobs, the unemployment rate rose from 4.1% to 4.2%, and average hourly earnings fell further behind inflation with just a 3.0% year-over-year increase (Figure 1). On a positive note, the labor force participation rate had its second straight positive month, rising from 61.6% to 61.8%.5
 

Figure 1. FRED. CPI Inflation vs Average Hourly Earnings last 5 years
Figure 1. FRED. CPI Inflation vs Average Hourly Earnings last 5 years

 

Current Developments (October)

The 10-year Treasury yield has now broken through the ~5% resistance level noted in last month’s update, reaching a peak of 5.34%. That is its highest level since 2002 after its biggest quarterly increase since 1994 (Figure 2).3 This increase can be explained by many factors, including rising inflation and economic growth expectations, increased corporate borrowing (tied to the AI buildout), a consistently hawkish Fed, and the looming $40 trillion national debt.

Figure 2. CNBC. 10-year Treasury yield from 01/1980 to 10/2026
Figure 2. CNBC. 10-year Treasury yield from 01/1980 to 10/2026

 

At 19.1x, the S&P 500’s forward PE ratio is below its 5-year average (19.8) and has been steadily diverging from the price of the index (Figure 3). In other words, earnings growth, not rising valuations, has been driving the market higher over the past year.6

Figure 3. MacroMicro. S&P 500 Forward PE Ratio and Price last 10 years
Figure 3. MacroMicro. S&P 500 Forward PE Ratio and Price last 10 years

 

President Trump promised no further strikes on Iran until after the midterm elections, but Iran continues to attack ships in the Strait of Hormuz.7 This has kept oil prices near $100/barrel, up from $70/barrel in July, and continues to create uncertainty for investors.8 

 

The Future

Looking ahead, markets face higher interest rates and inflation on one side and strong corporate earnings on the other. Both the Federal Reserve and Wall Street expect a rate hike at the Fed’s December meeting which would bring the federal funds rate to a range of 4.00%-4.25%.4 Higher rates weigh especially on housing and smaller companies that tend to borrow more. They also make stocks relatively less attractive as the “risk-free” rate increases. 


Still, stock prices have held up surprisingly well, mostly thanks to these strong earnings. Investors expect S&P 500 earnings to grow 30% in Q3 after 29% growth in Q1 and 52% growth in Q2.9 Whether earnings can outpace the pressure of higher interest rates and inflation remains to be seen.


Historically, October is a good month for the S&P 500, averaging a +0.91% return since 1950.10 Additionally, Q4 is historically the best performing quarter for stocks, especially in a midterm election year (Figure 4).
 

Figure 4. Ameriprise, Bloomberg. S&P 500 median return by month from 01/1946 to 01/2026
Figure 4. Ameriprise, Bloomberg. S&P 500 median return by month from 01/1946 to 01/2026

 

1. https://ycharts.com/indices/%5ESPXTR, https://ycharts.com/indices/%5EDJITR, https://ycharts.com/indices/%5ENACTR, https://ycharts.com/indices/%5ERUTTR, https://ycharts.com/indices/%5EMSEAFETR, https://ycharts.com/indices/%5EBBUSATR – Index Performance 
2. https://www.cnbc.com/2026/09/30/broken-market-75percent-of-sp-500-stocks-had-a-lousy-september-.html - S&P 500 in September
3. https://www.cnbc.com/bonds/ - Bond Yields
4. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html - Federal funds rate
5. https://www.investing.com/economic-calendar/ - Economic data 
6. https://en.macromicro.me/series/20052/sp500-forward-pe-ratio - S&P forward PE
7. https://www.usnews.com/news/world/articles/2026-10-08/trump-says-he-will-not-attack-before-us-elections-in-november - Iran War
8. https://fred.stlouisfed.org/series/DCOILWTICO - WTI Crude Prices 
9. https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/Earnings Insight_100926.pdf - Earnings
10. https://www.visualcapitalist.com/charted-average-sp-500-return-by-month-since-1950/– Monthly market history

 


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