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Q4 2026 Market Perspective
We had a bit of a rocky start and may be ending on a similar note. At the start of the year, investors faced many concerns, one of which persists: inflation. Meanwhile, the US-Iran war continues to add fuel to the fire as these two countries have not reached a peace deal since the initial strikes began back in February. As a result, oil prices have remained elevated and are likely to stay that way until the Strait of Hormuz reopens and normal operations resume. In light of this situation, the Federal Reserve has stepped in to manage inflation by raising rates at its September meeting. Although inflation remains relatively elevated, other economic indicators suggest that the US economy remains solid but vulnerable. Gross Domestic Product (GDP)growth remains positive, while the September unemployment rate remains stable at 4.2% (Trading Economics) despite signs of a cooling labor market. Nevertheless, investors are growing more cautious, closely monitoring the Federal Reserve’s policy decisions and economic forecasts, as well as any geopolitical progress between the US and Iran.
Inflation
Earlier this year, the Consumer Price Index spiked, driven primarily by the US-Iran conflict and the ongoing closure of the Strait of Hormuz. Year over year, core CPI and core Personal Consumption Expenditures (PCE)have remained relatively flat, with little to no change. Although inflation hasn’t risen dramatically, other macro indicators suggest the US economy is slowing. The labor market, for example, has softened, as measured by nonfarm payrolls. The September report showed the economy added just 29,000 jobs
(Trading Economics),
signaling slower hiring rates. Inflationary pressures have become a global concern as countries worldwide continue to battle rising oil prices. To counter higher oil prices, the Federal Reserve Bank raised rates at the September meeting to help achieve its 2% inflation goal.
Interest Rates
The Federal Reserve implemented its first rate hike in three years, bringing the federal funds rate to a range of 3.75%-4% as of September 2026. However, investors are already pricing in another rate hike by year-end.
Despite an anticipated rise in rates, we’re not looking at an aggressive Federal Reserve hiking cycle, meaning that an additional rate increase may not be as disruptive as the tightening cycle we experienced in 2022. During the September FOMC (Federal Open
Market Committee) meeting, the Federal Reserve released its updated Summary of Economic Projections, where it revised its end-of-year projections for Core PCE, previously at 2.7% Year-Over-Year (YoY) (March projection), now at 3.3% YoY for the end of 2026. These projections are used to provide forward guidance to help guide consumers and investors about future economic conditions.
The latest rate increase, along with inflation concerns, has tremendously impacted bond yields. The 10-year Treasury yield has climbed over 5%, reaching its highest level in nearly two decades. Nonetheless, we continue to ride the bull as the S&P hits another record high on October 16th.
Market Overview
Despite ongoing geopolitical tensions, both US and International markets delivered positive returns in Q3, with the S&P 500 up 11.77% YTD (Year-to-date) as of 09/30/2026. If we dissect it even further, we can clearly see that large caps have dominated, along with the Energy and Tech sectors. A common theme carrying into the next year is the topic of AI. Hyperscalers are projected to further increase Capex (Capital Expenditures) spending in 2027. Whether this translates into growth and profitability remains to be seen.
Given the current economic and market environment, uncertainty is likely to persist. Rising rates, inflation concerns, and geopolitical tensions are the main drivers of volatility.
CWM Portfolios
We expect market dynamics to continue evolving, but pressures may continue to arise from the US-Iran conflict. With rising yields, we are once again capitalizing on this opportunity and have started adding individual bonds to our client portfolios. This allows us to enhance portfolio income for those income-seeking portfolios while maintaining short duration to protect against interest rate risk. As we approach year-end, we will continue reviewing concentrated positions and ensure our clients maintain an appropriate level of diversification. This includes rebalancing and taking advantage of any tax loss harvesting opportunities.
Corinthian is your partner in your finances. We are a resource when you have questions. If you want to know how something will impact your financial situation, please contact your main advisor at (408) 995-0915.
Advisory services offered through Corinthian Wealth Management, Inc., a Registered Investment Advisor.
Sources
Dimensional. (n.d.). Quarterly review: Cautious investors tap the brakes. https://my.dimensional.com/quarterly-review-cautious-investors-tap-the-brakes
Federal Reserve. (2026, September 16). Summary of economic projections. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20260617.pdf
J.P. Morgan Asset Management. (2026, September 30). Economic and Market Update U.S Q4 2026.
Trading Economics. (n.d.). United States inflation rate. Retrieved October 12, 2026, from https://tradingeconomics.com/united-states/inflation-cpi
Ward, A., & Said, S. (2026). Trump rejects Iran ceasefire, expects renewed bombing after midterms. The Wall Street Journal. https://www.wsj.com/world/middle-east/trump-rejects-iran-ceasefire-expects-renewed-bombing-after-midterms-5982ee50
Yahoo Finance. (n.d.). Fed embarking on rate hike cycle https://finance.yahoo.com/economy/policy/articles/fed-embarking-rate-hike-cycle-174300526.html
Dimensional. (n.d.). Quarterly market review [PDF]. https://my.dimensional.com/chmedia/100153/source/quarterly-market-review.pdf
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