Capitalize on today's evolving market dynamics.
With changes to taxes and interest rates, it's a good time to meet with a wealth advisor.
Market News
Market analysis
October 13, 2026
Economic growth persists as inflation pressures and geopolitical risks increase; stocks approached records last week, bonds gained modestly, and real assets advanced.
Number of the week
24.1%
The year-to-date return of the MSCI Emerging Markets Index through October 9.
Term of the week
MSCI Emerging Markets Index – A stock market index measuring equity market performance across 24 developing countries.
Quote of the week:
A stable job market supports spending despite weak sentiment. Weekly unemployment claims remain very low, and a New York Federal Reserve survey found that consumers saw the lowest risk of losing their jobs since December 2024. However, expected inflation over the next year rose to its highest level since May 2023. The University of Michigan’s Consumer Sentiment Index fell more than forecast, and its assessment of current conditions reached a record low. Consumers continue to spend, but persistent price increases leave them less confident about their finances and the economy.
Bill Merz, CFA, Senior Vice President, Head of Capital Markets Research and Portfolio Construction, U.S. Bank
U.S. Bank Asset Management Group
Daniel Farley, CFA
Chief Investment Officer
Kaush Amin, CFA
Head of Private Market Investing
Chad Burlingame, CFA, CAIA
Co-Head of Public Markets Manager Research
Thomas Hainlin, CFA
National Investment Strategist
Robert Haworth, CFA
Senior Investment Strategy Director
William Merz, CFA
Head of Capital Markets Research
William Northey, CFA
Senior Investment Director
Terry Sandven
Chief Equity Strategist
Global economy
Quick take: Business activity and the labor market remain steady, while higher inflation expectations weigh on consumer sentiment. The Middle East conflict is keeping energy supply and shipping risks elevated.
- Service sector growth continues as cost pressures increase. The Institute for Supply Management reported that U.S. service activity expanded again in September, although new orders slowed and hiring was unchanged. Companies also paid more for materials and services, showing that inflation pressure remains embedded in operating costs. Business surveys showed continued growth in the eurozone and United Kingdom. In Japan, machine-tool orders rose more than 60% from a year earlier to a record, pointing to strong investment in equipment and automation. Together, the reports show that businesses continue to expand, but higher costs could squeeze profit margins or lead companies to raise prices.
- A stable job market supports spending despite weak sentiment. Weekly unemployment claims remain very low, and a New York Federal Reserve survey found that consumers saw the lowest risk of losing their jobs since December 2024. Households also expect their spending to increase at the fastest pace in more than three years. However, expected inflation over the next year rose to its highest level since May 2023. The University of Michigan’s Consumer Sentiment Index fell more than forecast, and its assessment of current conditions reached a record low. Consumers continue to spend, but persistent price increases leave them less confident about their finances and the economy.
- The Middle East conflict is keeping energy markets vulnerable. Iran increased attacks near the Strait of Hormuz, a passage that carries about one-fifth of the world’s seaborne oil. Shipping costs rose even as regional crude oil flows recovered toward levels seen before the conflict. The United States discussed renewed military operations but indicated that it would wait until after the midterm elections. Late last week, President Trump said Russia agreed to release additional diesel supplies to help reduce near-term energy costs. More available fuel could ease price pressure, but further attacks or military escalation could still interrupt shipping and lift oil prices.
Equity markets
Quick take: Stocks neared record highs last week as earnings expectations improved, but higher interest rates, oil prices and geopolitical risks created volatility. Market leadership continued to extend beyond the largest technology companies.
- U.S. large-company stocks approached a record, but results varied across markets. The S&P 500 Index closed Friday at 7,811, just below the record of 7,818 reached earlier in the week. Mid-cap stocks gained 1.4%, while small-company stocks fell 0.9%. Developed international markets declined 0.5%, and emerging markets were nearly unchanged. Year to date, broad market indexes have gained between 8.8% and 24.1%, led by emerging markets.
- Sector leadership broadened as investors weighed oil prices and interest rate levels. Higher oil prices favored Energy companies last week, while investors also bought shares in traditionally steadier industries. Technology stocks faced renewed questions about when artificial intelligence spending will generate profits. Broader participation aligns with continued economic growth. However, interest rates above 5% and persistent inflation make it harder to justify increasingly high stock prices without corresponding profit growth.
- Higher profit forecasts help offset above-average stock valuations. Analysts expect S&P 500 earnings to grow 32% in 2026 and 16% in 2027. Both estimates edged higher last week. The index trades at about 21 times expected 2026 earnings and 19 times expected 2027 earnings. These above-average prices place greater weight on companies delivering forecast profit growth.
- Third quarter company reports will test consumer and business strength. Analysts expect S&P 500 revenue to rise 11.9% and earnings to grow 23.1%. Several large financial companies report this week, with updates on spending, borrowing and credit. Delta Air Lines provided an early reporting season example: Travel demand remains strong, but higher fuel costs reduced earnings and prompted the company to lower its 2026 forecast.
- Artificial intelligence investment continues to reach more industries. Semiconductor and large technology companies remain prominent beneficiaries, but the opportunity now includes industrial firms, utilities, financial companies, selected healthcare businesses and communication services. Electricity, buildings and equipment can benefit as artificial intelligence requires more computing capacity. Longer-term gains depend on businesses turning this investment into measurable productivity and profits.
Bond markets
Quick take: Treasury yields changed little last week as investors absorbed new government debt. Federal Reserve minutes pointed to additional rate increases, while most major bond categories posted modest gains.
- Treasury prices held steady as buyers absorbed new government debt. Treasury yields moved last week but finished close to where they began. Short-term Treasury bonds returned 0.2%, while longer-term bonds gained 0.7%. Investors showed reasonable demand for three-year and 30-year Treasury securities, and especially strong buying at a 10-year auction pushed yields lower. Overseas, France’s 10-year government bond yield reached its highest level since 2002. The added income investors demanded to hold French rather than German debt widened to its highest level since 2012 as concerns grew about France’s debt and spending path.
- Most bond categories recorded small gains. A broad index of higher-quality U.S. bonds rose 0.4% last week. Investment-grade corporate bonds, issued by companies with stronger credit profiles, gained 0.6% and led the major categories. Treasury securities designed to adjust with inflation rose 0.3%. Bank loans and other investments whose interest payments reset as short-term rates change were nearly flat. Stable Treasury yields limited large price moves, but the broad gains showed that demand for income remains firm even as investors prepared for the possibility that the Federal Reserve will keep interest rates high or raise them further.
- Federal Reserve officials kept further rate increases on the table. Minutes from the Federal Reserve’s September meeting showed that most officials expected another rate increase before year-end, and several viewed current policy as only mildly restrictive. Officials cited limited recent progress on inflation, judged price risks as tilted upward and described the labor market as stable. Several also said rapid spending on artificial intelligence data centers could add to inflation. More recent speeches suggested officials could leave rates unchanged in October while still raising them later. Investors ended the week assigning about a 20% chance to an October increase and expecting roughly three additional increases through 2027.
Real assets
Quick take: Real estate, infrastructure and commodities gained last week. Utilities, energy networks, natural gas and metals led the advance, while results varied across real estate property types.
- U.S. real estate investment trusts rose 1.2% last week, but the gain masked meaningful differences among property types. Telecommunications tower owners led with a 3.6% increase, and residential properties gained 1.0%. Data centers declined 1.2%, although they remain up 28% this year, with artificial intelligence investment increasing demand for computing facilities. Healthcare properties, the market’s largest segment, fell 2.3% after strong gains during the past year. Broad real estate investments remain 8.5% higher in 2026. Elevated financing costs remain a challenge, while demand tied to artificial intelligence continues to favor data centers over some other property types.
- Infrastructure gains reflect strength in essential networks. Global infrastructure gained 1.6% last week, with utilities rising 2.7% and North American energy infrastructure advancing 1.6%. Transportation businesses, including toll roads and airports, fell 1.4% and limited the increase. Steady demand for electricity and fuel transportation favored utilities and energy networks, while economically sensitive transportation assets lagged. Infrastructure companies often collect recurring revenue from pipelines, electric grids, roads and other long-lived systems, and some can raise prices with inflation. Those characteristics can help diversify portfolios, although higher interest rates increase financing costs and create more competition from bonds for investors seeking income.
- Supply risks lifted natural gas and metals. Commodity prices rose 1.5% last week, led by a 5.4% increase in natural gas. Copper gained 2.5%, while gold and silver advanced 1.4% and 1.1%, respectively. Oil prices increased modestly as Middle East tensions threatened shipping and a Gulf Coast hurricane temporarily reduced U.S. production. These moves show how quickly weather and geopolitical events can alter expectations for available supply. Commodities can help a diversified portfolio offset rising inflation because higher input prices often increase their value. Prices can also reverse quickly when production recovers, demand changes or supply routes reopen.
This information represents the opinion of U.S. Bank. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated or associated with any organizations mentioned.
Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio. Diversification and asset allocation do not guarantee returns or protect against losses.
Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment. The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The Michigan Consumer Sentiment Index is a monthly survey of consumer confidence levels in the United States conducted by the University of Michigan. The survey is based on telephone interviews that gather information on consumer expectations for the economy. The Conference Board is a nonprofit research organization that distributes vital economic information to its peer-to-peer business members.
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. Investing in fixed income securities is subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in high yield bonds offer the potential for high current income and attractive total return but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer’s ability to make principal and interest payments. The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes but may be subject to the federal alternative minimum tax (AMT), state and local taxes. There are special risks associated with investments in real assets such as commodities and real estate securities. For commodities, risks may include market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults).
©2026 U.S. Bank
Insights from our experts
How we approach your long-term investing success
We use a data- and process-driven three step methodology to develop an investment strategy unique to you.
Q3 2026 investment outlook
Solid growth endures as policy and geopolitics shift.
Analysis: Assessing inflation’s impact
Persistently higher prices continue to weigh on consumers and policymakers alike.
Start of disclosure content
Disclosures
Start of disclosure content
Start of disclosure content
Equal Housing Lender. Deposit products offered by U.S. Bank National Association. Member FDIC. Credit products offered by U.S. Bank National Association and subject to normal credit approval.