Q3 2026 Wealth Management Insights

Even though the first official estimate of 3rd quarter Real Gross Domestic Product (GDP) will not be released until October 29, the supporting data that has been released shows an economy that continues to grow. Current forecasts range between 0.9% and 2.7% based on forecasts from economists surveyed by Bloomberg. The Atlanta Federal Reserve’s real-time model is the outlier with a current forecast of 5.0%.

 

Despite the continued negative results from consumer sentiment surveys, the consumer continues to spend. The August Retail Sales data showed a strong increase of 1.2%. The Federal Reserve’s regional survey (Beige Book) showed a continued “K-shaped” consumer spending pattern where high income earners continue spending while low income earners are becoming more price sensitive and selective. 

 

Business spending was a powerful contributor to growth as well. It is not just data center building. The Beige Book showed strength in manufacturing, defense-related orders, data centers and commercial construction. Businesses are also spending on software and hardware to improve productivity as labor supply remains an issue.

 

Hiring remains positive but not booming. Many economists have highlighted that deportation of working undocumented immigrants has depleted the labor force, and the current tight restriction on new immigration is limiting a traditional source of labor. A consequence of this dynamic is a decline in Labor Force Participation rate from 62.3% in July to 61.6% in August.

 

Fiscal policy provided a tailwind to economic growth but also generated crosscurrents that are buffeting the economy. The fiscal stimulus from the One Big Beautiful Bill Act continues to flow into the economy to provide the tailwind, while trade policy continues to buffet businesses and consumers with uncertainty and higher costs.

 

The lack of progress on inflation caused a change in monetary policy in the 3rd quarter. With the potential for a rebound in the inflation rate due to the current trade dispute with Canada and ongoing price pressures from the war with Iran, the Federal Reserve raised the overnight borrowing rate by 0.25% at its September meeting. More importantly, bond investors have driven long-term borrowing costs higher over a variety of concerns, including — but not limited to — inflation concerns, lack of progress on the growing debt level of the US, and competition with international bond rates. 

Third quarter activity remained positive despite the uncertainty of fiscal policy and higher borrowing costs from monetary policy. The important point to continue to remember is that the growth has not been homogeneous and a 
“K-shaped” economy remains in place.