Q3 2026 Market Commentary: Good or Bad, Time Will Tell

My core group of parenting friends has been a tremendous blessing in my life, and recently we have begun to encourage each other with the phrase “Good or bad, time will tell.” This encouragement to sit in a neutral space as things unfold began after a discussion we had about the old Chinese parable recorded more than two thousand years ago in the Huainanzi.

In the story, an old man living near the frontier loses his horse. His neighbors come to console him, but he isn't so sure the loss is a misfortune. Months later the horse returns, bringing a fine second horse with it, and the neighbors celebrate. He isn't so sure that's good news either. His son rides the new horse, falls and breaks his leg. His neighbors are puzzled that he doesn’t clearly declare this turn of events as bad. A year later, war comes to the frontier, and the young men are called to fight. The son, still injured, stays home and survives.

If you read my commentary frequently, you know that the personal wisdoms of life often flow into my views of the markets. This quarter brought several developments that looked clearly good or clearly bad in the moment, and for many of them, the honest answer is the old man's.

Resilient, Yet Mixed Economic Data

The economy remained resilient in the third quarter. Consumer spending picked up even as hiring slowed sharply. A cooling labor market can signal strain, or it can be the gradual rebalancing that helps bring inflation lower. Time will tell which story this becomes.

Energy, Inflation and the Federal Reserve

Excluding food and energy, price increases were relatively steady, but higher fuel costs kept overall inflation well above the Fed's 2% target. In September, the Fed raised rates for the first time since 2023, to a range of 3.75% to 4%, and signaled another increase could come before year-end. Its late October and early December meetings should tell us more, and we will be watching how higher fuel costs work their way through consumer spending.

Higher Rates for Longer

The 20-year Treasury yield reached its highest levels since 2007, raising borrowing costs and pressuring some of the higher valuations behind the AI-driven rally. Yet the same rate-hike momentum also creates lower-risk return opportunities, as money market funds and bonds offer more attractive yields. With policymakers expecting rates to stay elevated through 2027, whether that proves good or bad depends on your goals and how much interest-rate pressure the economy can endure. Time will tell.

As we close, we return to the old man and his horse. His wisdom was a willingness to hold judgment until the story had a chance to unfold. Because we can't know which of today's developments will look good in hindsight, we build portfolios meant to hold up across a range of outcomes, with your long-term goals at the center.

Good or bad, time will tell, and we will be here alongside you as it does. If you'd like to review your portfolio or talk through a question, we would welcome the conversation.

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