Weekly Market Recap – October 5, 2026
If the first quarter of 2026 was defined by the war in Iran, and the second quarter by strong tech and AI-related earnings, then the third quarter was defined by the Fed’s decision to hike interest rates by 25bps for the first time since 2023. The rate hike, alongside federal debt concerns, elevated AI-related debt issuance, the war in Iran and Fed uncertainty, has pushed bond yields higher across the curve. Rising yields drove a bond sell-off, sending the U.S. Agg down 4% in the third quarter. Small caps were also hit and fell 7% for the quarter. Since smaller companies typically
borrow floating-rate debt to fund operational growth, higher interest costs can disproportionately pressure margins. Commodities continued to surge as peace negotiations between the U.S. and Iran broke down, rising 16% during the quarter on higher oil prices. Oil prices have whipsawed on headlines but remain elevated relative to the start of both the quarter and the year. While the dollar was flat in the third quarter, it is still up nearly 3% this year as geopolitical concerns push investors toward safe-haven assets. Meanwhile, U.S. and international equities were little
changed during the quarter. This likely reflects the rapid rise in bond yields weighing on equities, rather than any breakdown in the global earnings narrative. Even so, both U.S. and international equities have posted double-digit gains so far this year.
If the first quarter of 2026 was defined by the war in Iran, and the second quarter by strong tech and AI-related earnings, then the third quarter was defined by the Fed’s decision to hike interest rates by 25bps for the first time since 2023. The rate hike, alongside federal debt concerns, elevated AI-related debt issuance, the war in Iran and Fed uncertainty, has pushed bond yields higher across the curve. Rising yields drove a bond sell-off, sending the U.S. Agg down 4% in the third quarter. Small caps were also hit and fell 7% for the quarter. Since smaller companies typically
borrow floating-rate debt to fund operational growth, higher interest costs can disproportionately pressure margins. Commodities continued to surge as peace negotiations between the U.S. and Iran broke down, rising 16% during the quarter on higher oil prices. Oil prices have whipsawed on headlines but remain elevated relative to the start of both the quarter and the year. While the dollar was flat in the third quarter, it is still up nearly 3% this year as geopolitical concerns push investors toward safe-haven assets. Meanwhile, U.S. and international equities were little
changed during the quarter. This likely reflects the rapid rise in bond yields weighing on equities, rather than any breakdown in the global earnings narrative. Even so, both U.S. and international equities have posted double-digit gains so far this year.
