October 2026 Market Insights

Weakness Beneath the Surface

September Was a Challenging Month for Investors

Financial news in September centered largely around the bond market. Interest rates rose sharply, and the yield on the benchmark 10-year U.S. Treasury ended the month at 5.3%. Longer-term Treasury yields reached levels not seen in more than two decades.

Because bond prices decline when interest rates rise, the increase in yields put pressure on bond values. At the same time, several major stock market sectors suffered losses, including financials, utilities, basic materials and real estate. September was a difficult month for investors across much of the financial markets.

The S&P 500 Masked Considerable Weakness

There was a striking difference between the performance of the S&P 500 Index and the performance of the average stock. The S&P 500 declined less than 1% during September. But when all 500 stocks in the index are given equal weight, the decline was nearly 5%. Approximately 78% of the stocks in the S&P 500 were negative for the month. That relatively modest decline in the headline index masked considerable weakness beneath the surface.

Technology was the clear standout. Large technology companies represent a significant portion of the capitalization-weighted S&P 500, and their strong performance helped offset weakness throughout much of the rest of the market.

Technology Defied Higher Interest Rates

Technology’s performance was particularly notable because growth-oriented technology stocks are generally sensitive to interest rates. Higher rates increase the discount applied to future earnings, which can put pressure on the valuations of growth companies.

Yet technology remained remarkably resilient in September. Continued enthusiasm surrounding artificial intelligence and strong performance from several mega-cap technology companies proved powerful enough to overcome that traditional interest-rate headwind.

Uncertainty Is Fueling a Choppy Market

We remain in a choppy, back-and-forth market fueled by uncertainty surrounding inflation and interest rates, a contentious midterm election, geopolitical tensions and elevated energy prices.

It is impossible to know how long these conditions will continue or which direction the market will ultimately take. If inflation remains persistent and interest rates stay high, we could see further declines. On the other hand, as some of these uncertainties are resolved, the market could resume its uptrend.

Reasons for Both Optimism and Caution

There are legitimate arguments on both sides.

Investor pessimism is high, and extreme pessimism can sometimes be a contrarian indicator. Seasonality also becomes more favorable as we move into what historically have been some of the stronger months for stocks.

There are also significant amounts of money sitting on the sidelines. If investors begin to see attractive opportunities, that money could move back into the market, creating additional demand and supporting higher prices. At the same time, persistent inflation, higher interest rates and geopolitical uncertainty remain meaningful risks.

There is enough positive evidence that we should not simply assume the worst and enough negative evidence that we should not ignore the possibility of further declines.

Process Over Predictions

The good news is that we don’t have to predict which outcome comes next.

That is why we have a disciplined process and a rules-based plan designed to respond as market conditions change. Rather than trying to forecast every turn in the market, we focus on the evidence in front of us and adjust as that evidence changes.

Markets will always contain uncertainty. Our job is not to eliminate that uncertainty. It is to have a plan for managing it. At Guelich Capital, we believe successful investing is less about predicting what the market will do next and more about having a disciplined plan for responding when conditions change.