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Elevated Yields, A Bigger COLA: A Pause Before a Big Week
U.S. equities paused this week ahead of a loaded calendar, with the S&P 500 down 0.46%, the Nasdaq Composite down 0.71%, and the Dow Jones Industrial Average up 0.42%. Smaller and more value-oriented stocks held up better, with the Russell 2000 up 2.01% and the Russell 1000 Value up 0.67%, while the Russell 1000 Growth fell 1.52%. All three major indexes remain solidly positive for the year, with the S&P 500 up 12.40% and the Nasdaq up 12.19% year-to-date.
Mixed Data, Easing Yields
The week’s economic data was mixed, with the U.S. Flash PMI coming in at a solid 57.6 while initial jobless claims rose by 194,000. Treasury yields eased again this week, with the 10-year at 5.00% and the 30-year at 5.33%, both down from quarter-end levels of 5.29% and 5.64%, respectively.
Bond Yields Boost Future Outlook
Fixed income investors have faced a difficult 2026, with the Bloomberg U.S. Aggregate Bond Index down 2.9% through September as its yield to worst climbed from 4.3% to 5.6%. However, starting yields have historically been a powerful predictor of future returns, explaining 89% of the variation in subsequent five-year annualized returns since 1976; at this week’s 5.3% yield, that relationship points to approximately 5.43% annualized returns over the next five years. J.P. Morgan’s newly released 2027 Long-Term Capital Market Assumptions reinforce this outlook, projecting annualized global aggregate bond returns of 5.3% over the next 10–15 years, the highest forecast in two decades.
Energy Surge Drives Oil Higher
Energy remains the standout sector of 2026, up 55.1% year-to-date, as crude oil continues to climb: WTI is near $103 per barrel (+79.9% YTD) and Brent is near $117 (+91.8% YTD.
Social Security Benefits Rise
Separately, the Social Security Administration’s 2027 cost-of-living adjustment came in at 3.6%, up from 2.8% in 2026 — a timely planning point for clients already drawing benefits, particularly alongside any offsetting increase in Medicare Part B premiums.
Looking Ahead
Looking ahead, next week brings a full slate of catalysts — a Federal Reserve meeting, the first estimate of third-quarter U.S. GDP, and meetings at the European Central Bank and Bank of Japan — any of which could move markets.
As Always
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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