Q3 2026 Newsletter & Market Review
Hi All,
Welcome to the Q3 2026 Newsletter & Market Review.
Last month I had the opportunity to contribute to a Bloomberg News article surrounding recent trends in 529 funding. It mostly focused on my personal strategy as a parent and some of the changes that I’ve noticed in my practice. I’ll leave the article link below in case you’re interested.
Q3 Market Performance
Overall the market is having another strong year. The major market mover in the third quarter was the Federal Reserve’s decision to raise interest rates. Even with the rate increase, the S&P was up slightly in the third quarter and up nearly 13% year-to-date. The tech sector has done very well this year. Tech increased 4% in the third quarter and 21% year-to-date. Small and mid cap stocks continue to perform well in 2026 up 14% and 9% respectively. If rates continue to rise, it could negatively impact small and mid-cap stocks. I will continue to monitor as we move into 2027.
Year-to-date Returns 2026 (as of 9/25/26)
S&P 500 +12.90%
Total Market +12.82%
Tech +21.54%
Mid Cap +9.02%
Small Cap +14.02%
International +12.49%
Q4 Financial Planning Reminders
Maximize Employer Retirement Contributions: Check your payroll pacing for your 401(k), 403(b), or 457. Ensure you are on track to hit the contribution goal by your final December paycheck. Be sure to schedule a meeting soon if you would like me to review your current contributions.
Open Enrollment: Take time during open enrollment to evaluate your health plan. If selecting a High Deductible Health Plan (HDHP), plan your Health Savings Account (HSA) contributions for maximum tax advantages. Please reach out with any specific questions regarding your workplace plans.
Tax-Loss Harvesting: As always, not everything went up this year. Review taxable brokerage accounts for positions trading below cost basis. Realizing capital losses can offset realized capital gains plus up to $3,000 of ordinary income. Let’s plan on reviewing your brokerage accounts during our next client meeting.
Prepare a Holiday & Year-End Spending Budget: This time of year gets expensive with gift-giving, travel, and seasonal costs. Setting clear cash reserves prevents holiday expenses from spilling over onto high-interest credit cards.
Review Flexible Spending Accounts: Check your balance in healthcare or dependent care FSAs. Because FSAs are generally “use-it-or-lose-it," be sure to maximize the funds you contributed to the account throughout the year.
Fed Rate Hike
At its September 2026 meeting, the Federal Reserve's Federal Open Market Committee (FOMC) unanimously decided to increase its benchmark interest rate, raising the federal funds target range by 0.25 percentage points to 3.75%–4.00%. This action signaled a renewed focus on combating persistent inflationary pressures, including rising oil prices which recently exceeded $100 per barrel. Despite prior restrictive measures, data on core inflation had not meaningfully improved, and a resilient jobs market with strong consumer spending further compelled the Fed to act to restrain economic activity. The decision, the first rate hike in over three years, immediately impacted financial markets. This will increase borrowing costs for mortgages, auto loans, and credit cards. The good news is that your cash reserves will earn slightly more in the high yield savings account.
Fixed Income- Bonds
Building the fixed-income portion of a portfolio has become more challenging as of late. The bond market can struggle during times of increasing interest rates. When interest rates go up, the value of existing bonds generally decreases, leading to potential capital losses. This inverse relationship between interest rates and bond prices poses a significant risk, especially with the Federal Reserve’s renewed focus on combating lingering inflation.
Another key challenge is inflation. Inflation erodes the purchasing power of the fixed interest payments generated by bonds. If the rate of inflation exceeds the yield on a bond, the real return, adjusted for inflation, can become negative. This makes it difficult for fixed-income investments to generate meaningful returns in real terms.
I have advised some of my clients to consider other options such as cash, dividend ETFs, and REITs. The right decision is different for every situation. Let’s be sure to discuss the appropriate fixed income mix in your portfolio as we look to rebalance accounts in 2027.
Out of Office
I will be out of the office October 19-22. We’re taking all 4 kids to Disneyland. Wish me luck!
I'm looking forward to seeing everyone in our fourth-quarter meeting. Feel free to schedule our next meeting using the link below.
David