Spiking bond yields, midterms, earnings to test US stocks’ typical fourth-quarter strength
Investors are entering a period of the year that typically brings positive results for US stocks, but there are several challenges that could impact the market. The S&P 500 and Nasdaq Composite are both up over 15% so far in 2026, but they still lag behind their mid-August highs. The year has been strong for stocks, with the S&P 500 averaging a 4.2% increase in the fourth quarter since 1945 and an 85% chance of gains.
However, the market is facing headwinds from rising bond yields, the upcoming earnings season, and the November midterm elections. The 10-year Treasury yield has reached its highest level in 24 years, which could be hindering market performance and increasing borrowing costs. Additionally, the Federal Reserve's upcoming policy decision and the impact of AI spending on corporate profits will be closely watched by investors.
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