Monthly Investment Letter - October 2026

Each month I review current research from First Trust, J.P. Morgan Asset Management, Franklin Templeton, MFS, and PGIM and share the points that matter most for your portfolios. In September the Federal Reserve moved from talk to action. This letter updates you on that decision, the rise in longer-term interest rates, and what has not changed in the underlying investment story.

The Fed Raised Rates

Last month we wrote that a September rate increase had become a live question after Chair Kevin Warsh’s Jackson Hole speech. On September 16 the Federal Open Market Committee answered that question. In a unanimous 12–0 vote, the Fed raised its policy rate by a quarter point to a range of 3.75% to 4.00%—the first increase in more than three years.

Warsh described the move as removing “a dose of accommodation,” not as a declaration that policy is now restrictive. He said inflation is too high and has been for too long, that the labor market is in good shape, and that the Committee’s main focus is price stability. He again declined to offer detailed forward guidance. The Fed’s updated projections, however, show that most officials expect at least one more quarter-point increase before year-end. The median year-end funds-rate estimate rose to about 4.1%.

MFS later summarized the credit-market takeaway this way: the Fed’s actions are speaking louder than its words, and investors should stay disciplined and focus on quality income. Late in the month, comments from New York Fed President John Williams cooled the most aggressive October-hike bets, but the broader message is unchanged. Rates are no longer on hold.

Bond Yields Moved Higher

The rate hike was only part of the story. First Trust’s weekly commentary for the week ended September 25 noted that the bond selloff continued. The 10-year Treasury yield moved above 5%, and the 5-year yield also crossed 5% for the first time since 2007. The 30-year yield reached levels last seen in the mid-2000s. MFS’s Week in Review for the same period described global equities as broadly flat, pressured by that jump in yields and by swings in oil prices.

Higher long-term yields matter because they compete with stocks for investor capital and raise the cost of financing for companies and households. They also create more income in high-quality bonds than we have seen for much of the past decade—if duration, the sensitivity of bond prices to rate moves, is managed with care.

Growth Held Up; Energy Prices Did Not Stay Quiet

The economy did not buckle under the new rate path. First Trust reported that September business-activity surveys showed the fastest pace of U.S. expansion in more than five years, with hiring rising to meet demand. That strength is one reason the Fed felt comfortable tightening. At the same time, consumer sentiment slipped to a four-month low as higher gasoline prices weighed on households.

Oil was volatile. Brent crude briefly moved above $106 on threats to extend the Middle East conflict, then eased as reports circulated of talks on a phased reopening of the Strait of Hormuz. First Trust noted that a late-week drop in oil helped the S&P 500 gain about 1.2%, led by technology. Geopolitics remains a swing factor for inflation and for market mood.

What Has Not Changed

Company profits and the AI investment cycle are still the main supports for stocks. Franklin Templeton’s September Allocation Views kept a “risk-on” stance, citing resilient growth and strong corporate fundamentals even while flagging inflation, policy, and the risk of excess enthusiasm in parts of technology. The firm continues to favor diversified equity exposure with a technology tilt, plus emerging markets and Japan. ClearBridge, a Franklin Templeton affiliate, has also argued that high-quality dividend growers outside technology and a measured energy allocation can balance an AI-heavy portfolio. PGIM still frames the year as one of strong tailwinds—AI spending, fiscal support, and a resilient high-end consumer—alongside thicker risks from geopolitics and inflation. J.P. Morgan’s earlier factor work remains useful: value and quality look inexpensive by historical standards, while crowded momentum carries more risk of a setback.

How the Research Teams Line Up

•        Stocks: still constructive, more selective. Franklin Templeton is staying invested and watching for bubble-like behavior in a few AI leaders rather than abandoning the theme. MFS has written about industrials as another way innovation is showing up outside software. First Trust’s weekly data showed large-cap technology leading a rebound while smaller stocks lagged as yields rose.

•        Interest rates: higher, and likely to stay data-dependent. The “on hold through 2026” view from mid-year is behind us. Officials have signaled at least one more hike is possible this year. October meeting odds have swung with each speech. The next inflation and employment reports will matter.

•        Bonds: more income, more price swings. MFS notes that credit markets have remained resilient. Higher yields make high-quality intermediate bonds, municipals, and selective credit more useful for income. Long-dated bonds have been the most volatile.

•        Risks to watch this month: the October Fed meeting, incoming inflation and jobs data, oil and Hormuz headlines, and whether earnings can keep justifying today’s valuations as financing costs rise.

Our Approach

My overall view has not flipped. I remain constructive on stocks over a multi-year horizon because earnings, not just rising valuations, have been doing much of the work. The Fed’s hike does mean we should give interest rates more attention than we did in the spring. Higher yields can pressure stock multiples and rate-sensitive sectors such as utilities. They can also improve the role bonds play in a balanced portfolio.

We continue to emphasize quality companies, a balance of growth and value, exposure beyond a small group of AI leaders, and high-quality bonds for income and stability. September showed that growth can coexist with tighter policy—and that markets can still move quickly when yields and oil jump together. The research still points to resilience and opportunity, provided we stay diversified and patient.

Please reach out anytime if you would like to discuss how this update applies to your plan.

Warm regards,

Seth Burzycki

Guided Financial Strategies

Important Disclosures

This letter is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. It summarizes third-party research as of September 2026. Those views are subject to change without notice. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit or protect against loss. Please consult your advisor regarding your specific situation. Sources include First Trust weekly market commentary (week ended September 25, 2026) and Q3 2026 Equity Newsletter; J.P. Morgan Asset Management Factor Views 3Q 2026 and related commentary; Franklin Templeton Allocation Views (September 2026) and related notes; MFS Week in Review (weeks of September 18 and September 25, 2026), Strategist’s Corner, and fixed-income commentary; and PGIM 2026 Mid-Year Market Outlook and On the Markets.