Oct. 1, 2026

U.S. equities capped off the third quarter by continuing their upward march, underpinned by durable economic growth and resilient corporate fundamentals.

Even as long-term Treasury yields surged to multi-year highs—with the 10-year yield breaching 5% for the first time since 2007—and investors contended with ongoing Middle East geopolitical unrest and debate surrounding AI capital spending, the S&P 500 closed September essentially flat (-0.35% at 7,652) to secure a +2.30% gain for Q3.

While these results are encouraging, the underlying divergence reminds us that staying balanced and disciplined remains as crucial as ever. We will explain these trends in the next edition of the GRAnderson Wealth Monthly Economic Update, due to be posted by the end of this week. 

Reversing the broader participation seen in the second quarter, mega-cap leadership reasserted itself throughout Q3. The S&P 500 Top 50 gained +1.90% in September and finished the quarter up +3.98%. In contrast, higher-for-longer borrowing costs placed significant pressure on smaller and mid-sized companies.

The S&P MidCap 400 fell -4.22% in September (-6.36% QTD), while the S&P SmallCap 600 dropped -5.57% (-7.93% QTD). This divergence underscores why disciplined, quality-focused diversification remains essential when navigating late-cycle interest rate pressures.

Sector Divergence: Tech and Energy Drive the Market

Sector returns diverged markedly across defensive and growth segments:

Information Technology & Communication Services: Technology led monthly index performance (+4.47% in September, +7.20% QTD), serving as the single largest contributor to the S&P 500’s Q3 advance (+2.72% sector contribution). Communication Services also rebounded with vigor (+4.33% in September, +3.64% QTD).  

Energy: Powered by an ongoing rally in crude oil, the Energy sector gained +17.23% in Q3, making it the top-performing sector of the quarter despite a mild -2.72% consolidation in September.  

Rate-Sensitive Sectors: The surge in Treasury yields weighed heavily on interest-rate-sensitive areas. Utilities dropped -5.90% in September (-12.39% in Q3), and Financials fell -7.16% for the month (-0.12% in Q3). Industrials (-4.42% 1M, -9.66% QTD) and Materials (-6.74% 1M, -2.81% QTD) also faced headwinds. 

Style leadership shifted over the course of the quarter:

• Growth and Value Stability: Growth (+1.95% 1M, +3.44% QTD), Value (-3.10% 1M, +0.90% QTD), and Enhanced Value (-5.57% 1M, +0.58% QTD) were the only factor indices to finish the third quarter in positive territory.
• Momentum Rebound: While Momentum trailed the S&P 500 for the full quarter (-6.10% QTD), it rebounded strongly in September (+3.19%), matching a concurrent rise in High Beta (+3.07%) as risk-on sentiment returned to technology and growth equities.
• Dividend & Defensive Weakness: Dividend-oriented and lower-volatility strategies experienced notable pullbacks as cash alternatives and high bond yields drew capital away from traditional dividend payers. The S&P 500 Low Volatility High Dividend Index dropped -7.74% in September, and Dividend Aristocrats declined -6.04%.

See this month's GRAnderson Wealth Management Economic Update for details.

Persistent inflation jitters, expanding fiscal deficit concerns, and expectations of tight monetary policy drove benchmark bond yields to levels not seen in nearly two decades.

• The 10-Year U.S. Treasury yield reached 5%, creating substantial repricing across fixed-rate debt.
• The broad S&P U.S. Aggregate Bond Index declined -2.27% in September (-3.03% in Q3), with the index yield rising to 5.49%. Municipal bonds (S&P National AMT-Free Muni Bond) fell -4.73% for the month (-6.57% in Q3; yield at 4.74%).
• Floating-Rate Outperformance: Benefiting directly from higher base rates, senior secured loans provided strong capital preservation. The S&P UBS Leveraged Loan Index gained +0.26% in September (+2.03% QTD), offering a current yield of 9.60%.

Broad commodities continued their secular run, with the S&P GSCI advancing +4.79% in September and +25.10% over Q3.

• Energy Commodities surged +11.82% in September and +45.02% across Q3, driving year-to-date energy commodity returns to an extraordinary +119.95%.
• Precious Metals pulled back -6.60% in September (+2.94% QTD), as rising real bond yields and dollar strength placed near-term pressure on gold and silver.
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Find details about these trends and other statistical categories in our latest Economic Update.

Stay Disciplined. Stay Diversified.