“Blink and you might miss it.” That expression very well might describe how some investors are feeling when it comes to keeping up with — and making sense of — recent headlines in the financial world.
Just look at events from the third quarter of this year: Equity markets hit record highs while treasury yields rose. Inflation remained incredibly stubborn. Plus, AI-driven market shifts and geopolitical developments influenced economies across the world.
But what developments truly mattered?
That’s where Washington Trust Bank’s Investment Team comes in. Our experts have the knowledge, experience, and insights to give you perspective beyond the headlines.
For a look at what lessons investors can take away from the third quarter, watch our most recent Quarterly Financial Markets Update in the video below.
Watch the 2026 Q3 Financial Markets Update
Economic update.
The US economy is cooling but remains resilient, says Matthew Clarke.
Matt emphasizes a weaker labor market compared to expectations, persistent inflation above the Fed’s target, and ongoing strength in consumer spending despite real income pressures. Overall, Matt sees growth as steady but increasingly sensitive to financing costs and affordability constraints.
Matt emphasizes a weaker labor market compared to expectations, persistent inflation above the Fed’s target, and ongoing strength in consumer spending despite real income pressures. Overall, Matt sees growth as steady but increasingly sensitive to financing costs and affordability constraints.
Key points:
- The labor market cooled with mixed signals.
- Inflation remained sticky and real incomes are under pressure.
- Growth is steady, driven heavily by the consumer.
- Financing costs and affordability are key emerging risks.
- Credit conditions show mild deterioration but no acute stress.
“Higher borrowing costs are going to be a focal point and a pretty significant risk for the economy.”
Matthew Clarke, CIMA®
VP / Senior Portfolio Manager
Global markets update.
The third quarter was characterized by moderate volatility, shifting interest rate dynamics, and continued concentration in equity leadership, says Derrick Wilson.
He compares US and international returns, breaks down equity composition trends, and reviews fixed income and alternative asset class performance across regions.
Key points:
- US equities modestly outperformed international markets during the quarter, although international equities remained stronger over the past year.
- Mega-cap technology companies drove US market gains, while mid-cap and small-cap stocks struggled.
- Developed international markets outperformed emerging markets as the composition of emerging-market indexes continued to shift.
- Rising global yields pushed bond prices lower, with longer-term and credit-sensitive investments experiencing the greatest pressure.
- Strong commodity performance and diversified strategies helped offset weakness in bonds, real estate, and infrastructure.
“Alternative investments provide an offset to the fixed income declines.”
Derrick Wilson, CIMA®
VP / Portfolio Manager
Domestic equity update.
Allan Prins emphasizes resilient headline index gains alongside increasingly concentrated leadership.
He explains that despite macro headwinds such as higher bond yields, oil price volatility, and geopolitical uncertainty, major indices still posted positive returns in Q3, largely driven by a small group of mega-cap technology stocks.
Key points:
- The S&P 500 and Nasdaq posted modest gains during the quarter, while small-cap stocks declined.
- A small number of mega-cap technology companies drove much of the market’s growth.
- Strong earnings and continued interest in AI helped the Magnificent Seven offset weakness in other sectors.
- Energy and information technology performed well, while higher interest rates weighed on utilities and industrials.
- Strong earnings continued to support stock valuations, but future performance may depend on interest rates, earnings results, and profit margins.
“Under the surface, there was a lot more price volatility than maybe what you saw on the surface.”
Allan Prins, CFA
Equity Portfolio Manager
Domestic fixed income update.
Callen Young notes the sharp rise in bond yields across global fixed income markets.
The key forces driving that move, he says, include fiscal pressures, heavy issuance, and shifting demand. Callen also discusses how these dynamics have impacted both sovereign and credit markets, resulting in broad-based negative returns for the quarter but also improving forward-looking income opportunities.
Key points:
- Rising yields in developed markets reflected fiscal concerns in Europe and weaker foreign demand for US Treasury bonds.
- US Treasury yields rose across all maturities as investors weighed inflation, government policy, debt supply, and the fiscal outlook.
- Inflation expectations remained stable despite rising oil prices and broader energy-market volatility.
- Heavy bond issuance helped to lead interest rates higher thus causing widespread losses, especially among longer-term bonds.
- Higher yields created better income opportunities in bonds, particularly Treasury inflation-protected securities and municipal bonds.
“The path forward may remain volatile, but higher yields have improved the long-term income opportunity available in fixed-income markets.”
Callen Young, VP
Portfolio Manager
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