To Our Clients,
The third quarter delivered something that sounds like a contradiction. The Federal Reserve raised interest rates, oil climbed back above $100 a barrel, and yet the stock market finished the quarter near record highs.
If that seems puzzling, you're not alone. It's a bit like a forecast calling for rain all week and getting sunshine instead: nobody's complaining, but everyone keeps glancing at the sky. Normally we'd expect higher borrowing costs and pricier gas to weigh on stocks. This quarter, a surprisingly strong economy and a massive wave of corporate spending on artificial intelligence kept pushing the other way.
Below, we'll walk through what happened, share a few things about today's market that rarely make the headlines, and explain what we're watching as we head into the final stretch of 2026.
Key indicators at a glance
Stocks rose modestly over the quarter, while nearly every measure of borrowing costs rose higher.
| Indicator | End of Q3 (Sep 30, 2026) | YTD change (since Dec 31, 2025) |
|---|---|---|
| S&P 500 index level | 7,652 | +808 (+11.8%) |
| S&P 500, year to date | +11.8% | — |
| Fed funds rate | 3.75–4.00% | +0.25 pts (from 3.50–3.75%) |
| 10-year Treasury yield | 5.21% | +1.05 pts (from 4.16%) |
| 30-year mortgage rate | 7.03% | +0.88 pts (from 6.15%) |
| PCE inflation (2026 est.) | 3.4% | — |
| U.S. GDP growth (2026 est.) | +2.3% | — |
Sources: YTD changes measured from Dec 31, 2025 levels: Fed funds 3.50–3.75% (FOMC, Dec 10, 2025); 10-year Treasury 4.16% (CNBC, Dec 31, 2025 close); 30-year mortgage 6.15% (Freddie Mac PMMS, Dec 31, 2025). S&P 500 index level per CNBC (Sep 30, 2026 close); year-to-date change calculated from the Dec 31, 2025 close of approximately 6,844 per D.A. Davidson. Fed funds rate per the Federal Reserve FOMC statement of Sep 16, 2026, as reported by J.P. Morgan Wealth Management. 10-year Treasury yield per Investing.com (Sep 30, 2026). 30-year fixed mortgage rate per Freddie Mac Primary Mortgage Market Survey (Sep 24, 2026). Brent crude per Trading Economics (Sep 30, 2026); Jun 30 level approximate (Jul 1, 2026). Unemployment rate and CPI per U.S. Bureau of Labor Statistics; PCE per U.S. Bureau of Economic Analysis (August 2026 data), as reported by J.P. Morgan Wealth Management and Trading Economics. Data as of Sep 30, 2026 unless otherwise noted.
The Fed changed direction
On September 15, the Federal Reserve raised its key interest rate by 0.25%. It was the Fed's first rate increase since July 2023, and the vote was unanimous, 12–0 (J.P. Morgan).
Why? Inflation has run above the Fed's 2% goal for about five years, and prices rose 3.4% over the past year through August. Fed Chair Kevin Warsh summed it up bluntly: inflation is too high and has been for too long (NPR). Sixteen of 18 Fed officials expect another increase before year-end.
In everyday terms: credit cards, home equity lines, and other variable-rate loans get more expensive. On the flip side, cash in savings, money market funds, and CDs continue to earn more. For once, the savers at the dinner party get to be the ones with good news.
Oil and the Strait of Hormuz
The conflict with Iran is the single biggest reason inflation hasn't cooled. Oil spent most of September above $100 a barrel, and gas prices are near their highest level since the conflict began. Diesel, which moves nearly everything we buy by truck, hit a record above $6 a gallon. If you've filled up a truck lately, you didn't need us to tell you that.
Negotiations to reopen the Strait remain stalled, and a resolution before the November midterms looks unlikely based on recent reporting (Trading Economics).
Tariffs: a small thaw with China, a new fight with Canada
Trade headlines cut both ways this quarter. Late last week, the U.S. and China agreed to lower tariffs on $30 billion of goods in each direction, covering everything from U.S. coal and farm products to Chinese-made toys and holiday decorations. The broader trade truce now runs to January 10th. The summit also produced a promise of two pandas for the Atlanta Zoo, which may be the only trade item this year nobody is arguing about.
Closer to home, the U.S. placed a 50% tariff on $20 billion of Canadian goods, and Canada responded with its own tariffs starting September 8th.
The economy is stronger than it feels
Official growth for April–June was a modest 1.5%, but that headline hid real strength: consumer spending grew at a 3.4% pace, and business investment rose 8.5% (TD Economics). Employers added 162,000 jobs in August, about three times what economists expected, and unemployment held at 4.1%. All in all, despite the opposing factors, the economy has continued to show resilience even during rising inflation and energy prices.
Your year-end planning checklist
The end of the year is also a deadline for several planning opportunities. These are worth a conversation with us before December.
- Required minimum distributions (RMDs). If you're required to take one, it generally must be completed by December 31st.
- Charitable giving. Gifting appreciated stock before year-end.
- Retirement contributions. Making sure you've maximized contributions for 2026. You will have until April 15, 2027, to fund IRA and Roth IRA contributions for 2026.
- Cash. With cash still earning meaningful interest, confirming that idle money isn't sitting in accounts paying little or nothing.
What this means for you
The big picture hasn't changed much, but the details have. Borrowing is more expensive, energy is a wild card, and a small group of companies is carrying a lot of the market's weight. At the same time, the economy keeps surprising to the upside, and savers are being paid well to hold cash.
None of that calls for dramatic moves.
It does reinforce three things we believe in: stay diversified so no single company, sector, or headline can derail your plan; keep enough cash on hand that you're never forced to sell at a bad time; and use year-end planning opportunities while they're available.
If anything in this letter raises a question about your own situation, please reach out. That's what we're here for. Thank you, as always, for trusting us with your financial future.
Warm regards,
The Cannon Capital Management Team
Disclosures: This letter is for informational purposes only and does not constitute investment, tax, or legal advice, or a solicitation to buy or sell any security. Past performance is not indicative of future results. Index figures are shown for market context only; the S&P 500 is unmanaged, cannot be invested in directly, and does not reflect fees or expenses. Economic estimates and forecasts are subject to revision. Diversification does not guarantee a profit or protect against loss. Please consult your tax advisor regarding year-end planning items. Data as of September 30, 2026 unless otherwise noted.