Third Quarter Newsletter
Responsible Guidance: Third Quarter 2026 Newsletter, October 2026
The Market Does Not Read the Headline…
Have you ever read the morning headlines, wondered how the stock market could possibly go higher, and then watched it do exactly that? If so, you're not alone. Economic uncertainty, geopolitical developments, and changing expectations for inflation and interest rates continued to dominate the news during the third quarter of 2026. Yet financial markets often responded differently than the headlines might suggest.
This disconnect offers an important reminder: markets reflect expectations about the future, while headlines often focus on the events of today. Understanding that difference can help us avoid allowing short-term emotions to influence long-term financial decisions.
At Baron Financial Group, the philosophy behind Your Personal Economy℠ focuses on building financial independence throughout your lifetime, rather than allowing daily news stories and market movements to dictate decisions. As we review the third quarter and year-to-date (YTD) 2026 performances, we hope you are not only updated about what has happened in the economy and markets but understand and are confident in our approach for you. Your Personal Economy℠ is at the center of the process, and we aim to help you answer the most important financial question: “Am I going to be okay?”
A Global Perspective
A core objective for our customized Baron Financial Group investment strategies is global diversification, meaning strategies can include investments based both in the U.S., as well as internationally in developed and emerging countries. There are popular benchmark indexes that provide perspectives about the performance of global investments.
The MSCI ACWI All Cap Index represents stock investments across 23 developed and 24 emerging markets. The index held positive in the third quarter and was up 1.08% for the quarter and 12.95% YTD. Global stock markets continued to demonstrate resilience during the third quarter, although performances varied considerably across countries and investment styles.
The FTSE World Government Bond Index tracks sovereign debt from 20 countries, denominated in their respective currencies. The index was negative in the third quarter, down 2.43%, and is also now down 2.80% YTD. Interest rates moved higher across the globe creating the negative performance (rising interest rates can cause bond price declines). The index's loss reflected the complex interplay between flight-to-quality demand that usually occurs for bonds during times of geopolitical unrest, offset by inflation concerns, and the impact of dollar-strength on international bonds.
U.S. Economy
The U.S. economy grew in the second quarter. Growth is expected to continue, but possibly at a higher rate. Jobs continue to be added, however, there are signs of slowing. The unemployment rate remains above 4%. The Federal Reserve increased its target interest rate, by one-quarter percentage point, to 3.75%-4.00% in September, as inflation concerns continue.
According to the Bureau of Economic Analysis (BEA) the U.S. economy grew by 2.2% in the 2nd quarter of 2026, based on the third and final estimate. The primary drivers for growth were increases in consumer spending, investment, and exports (the full press release can be found at https://www.bea.gov).
Because GDP is reported with a delay, the Federal Reserve Bank of Atlanta publishes a “nowcast” by estimating GDP growth for the most recent quarter (in this case the third quarter of 2026) using an approach like the BEA. On October 15th, 2026, the estimate for third quarter GDP from the Federal Reserve Bank of Atlanta suggests growth may accelerate, forecasting a 3.6% growth rate. Please note that this estimate updates regularly and is subject to change. The “nowcast,” along with the methodology, and additional information can be found at: https://www.atlantafed.org/cqer/research/gdpnow.
According to the Bureau of Labor Statistics (BLS), the U.S. gained 29,000 jobs for the month of September, and the unemployment rate remained at 4.2%. Although the economy continued to create jobs, the slower pace of hiring suggested that businesses may be becoming more cautious. (full press release can be found at: https://www.bls.gov).
U.S. Stocks
The S&P 500, an index consisting of roughly 500 of the largest U.S. domestic stocks, continued to advance in the third quarter, up 2.30%. YTD the index is up 12.75%. The positive results, however, concealed meaningful differences beneath the surface. Large U.S. companies generally held up better than smaller businesses during the quarter, while the technology sector continued to influence overall market performance.
For technical analysts and trend followers, the index remained above the 200-day moving average during the third quarter. But like in the 2nd quarter, the index oscillated around the 50-day moving average near quarter end.
Dividing index components into growth and value, value-focused stocks regained performance leadership in the third quarter and are well ahead, YTD. Growth-focused stocks have mostly dominated over the last decade. Value last outperformed on a calendar-year basis in 2022, when most equity indexes were struggling.
International Stocks
International-developed-country stocks (such as those in the European Union and Japan), measured by the MSCI EAFE index, increased 0.81% in the third quarter, bringing YTD performance to 10.33%.
Non-developed, or emerging-country stocks (such as those located in Brazil, India, and China), measured by the MSCI EM index, weakened slightly and was down 0.37% for the third quarter. However, performance for the year remained strong, up 23.38%. YTD this is currently the best performance for an equity-focused index that we cover in our newsletter.
The changing leadership between U.S. and international investments reinforces the importance of maintaining diversification across global markets.
Bonds
U.S. Domestic Fixed Income (bonds), as measured by the Barclays U.S. Aggregate Bond Index (gauges performance of investment-grade intermediate bonds), experienced a difficult quarter. The index was down 3.51% in the third quarter, driving YTD performance into negative territory. At the end of the third quarter the index was down 2.91%. For investors who hold bonds to provide income and portfolio stability, this distinction is important. Although higher interest rates can create short-term price declines, they also provide opportunities to earn higher income on newly purchased bonds. The appropriate balance between income, interest-rate sensitivity, and liquidity depends on each investor's financial needs and time horizon.
The Federal Reserve acted at its September meeting to fight inflation and increased its target Fed Funds Rate range by 25 basis points (a basis point represents 1/100 of 1%) to 3.75% - 4.00%. This puts a definite end to its rate-cutting cycle that started in September 2025.
The 10-year U.S. Treasury bond yield finished the third quarter at 5.29%, significantly higher than 4.18%, at the start of the year.
We continue to monitor shape of the yield curve for U.S. debt issues because it has historically provided insight into investor expectations for economic growth. A positively sloped curve (long-term rates higher than short-term rates) indicates potential future economic expansion. A flat spread (long-term rates match short-term rates) is a possible indicator of economic uncertainty. An inverted spread (short-term rates are higher than long-term rates) possibly indicates future economic contraction.
At the end of the second quarter, the 2-year rate was 4.88% (and 10-year, 5.29% per above), keeping the shape of the yield curve positive, at 41 basis points. However, the shape of the curve remains flatter than at the start of the year, at 71 basis points. Though longer-term interest rates have moved higher, the increase in short-term rates, including the Federal Reserve increasing its short-term target rate, have been greater, causing the curve to flatten. We know the Fed is fighting inflation with actions on short-term rates. However, there remains some debate about why investors are demanding higher rates for longer-term bonds. Could it be concerns about inflation, or expectations for greater economic growth? Time will tell.
Real Estate and Housing
Commercial real estate, as measured by the FTSE NAREIT All Equity REIT (Real Estate Investment Trust) Index, gave back a significant portion of its gain from the second quarter and was down 6.06% in the third quarter. YTD performance remained positive, up 7.93%. Publicly traded real estate experienced renewed pressure during the third quarter as rising interest rates affected investor expectations. Although many real estate businesses may have generated rental income, higher financing costs and competition from other income-producing investments weighed on the sector.
According to Freddie Mac (FM), the average 30-year residential home mortgage rate increased to 7.40% (as of 10/08/2026) from 6.15% at the start of the year. At this time a year ago, the rate was 6.30%.
Natural Resources
The Bloomberg Commodity Index came roaring back in the third quarter, up 16.19%. YTD the index is up 32.87%. This is the best performing index, of those we cover in this newsletter, for both the third quarter and YTD. Geopolitical developments, energy markets, and inflation concerns contributed to substantial price movements. You may remember the index was negative in the second quarter. As we say, performance leaders rotate, which continues to support the diversification strategy.
Baron Client Strategies
Planning for multiple outcomes with Your Personal Economy℠ is critical to helping our clients answer the simple question "Am I going to be OK?".
As Registered Investment Advisers (fiduciaries) and Fee-Only advisors, we do not receive a commission for making investment transactions. Our decisions are grounded in your goals. A primary reason your Baron team makes trades is to align clients' portfolios with their customized, risk-appropriate globally-diversified strategy. We believe these actions potentially strengthen clients' portfolios or financial positions. We use this same approach with our own personal money.
No matter the economic environment, our basic principles remain: Create a globally-diversified and risk-appropriate strategy. Validate the investment choices versus peer investments. Rebalance when needed. Test the strategy in a comprehensive financial plan and obtain regular feedback to update information and advance your financial position.
Your Service Plan
One of our primary roles is to educate our clients to make informed decisions about reaching their goals. Critical to that process are plan reviews, a process that focuses our attention on your goals, takes account of any changes in your situation, and allows us to alter the course, as necessary. If you have experienced any changes to your financial position or are considering changing financial goals and objectives, please let us know.
Your Personal EconomySMFinancial headlines are designed to capture attention. Your financial plan, however, should be designed around your goals. For some clients, the primary objective is generating dependable retirement income. For others, it may be preserving wealth, supporting family members, managing taxes, or leaving a financial legacy. Our responsibility is to consider these objectives when establishing investment strategies, managing portfolio risk, and making adjustments as circumstances change. That includes maintaining appropriate diversification, following established rebalancing guidelines, monitoring position sizes, and periodically reviewing your financial plan. Rather than attempting to predict every market movement, we focus on preparing for a range of possible outcomes. Financial independence does not require correctly predicting each market move. It requires a plan that reflects Your Personal EconomySM, including your goals, resources, willingness and ability to take risk, and the ability to remain focused when the headlines become distracting. As you review your plan, remember that a comprehensive financial plan extends beyond investments. Estate planning, taxes, and insurance all play important roles in helping protect your financial well-being and keep your plan aligned with your needs. October is Financial Planning Month, making it an ideal time to revisit these areas and consider whether any adjustments are needed. For those age 65 and older, this is also the time to review Medicare coverage for 2027. The annual Medicare Open Enrollment Period runs from October 15 through December 7, 2026, with changes taking effect January 1, 2027. Baron Financial Group offers assistance through our Medicare consultants, whether you would like to review your current coverage or need help with new Medicare enrollment. If you are age 64 or older, you should have received an email or letter from us outlining this service. If you have questions or would like assistance, please don't hesitate to reach out to our team. |
Concluding Comments
The third quarter of 2026 reminded us that financial markets and economic headlines don't always tell the same story. While understanding current events is important, successful financial planning requires a broader perspective. Markets will continue to react to new information, economic conditions will change, and periods of uncertainty are inevitable. Our goal is to help you navigate those changes with a strategy that reflects your personal circumstances and long-term objectives.
The headlines and news stories will continue to change but the original principles remain intact to achieve financial independence within Your Personal EconomySM.
Baron Updates
For our clients and friends, we hope you enjoyed our recent Client Appreciation Event in New Jersey. It is always a pleasure to see you! At our events, we like to take the opportunity to introduce you to some of the dedicated individuals behind the charitable organizations we are humbled to support. Thank you to Sal Moran from Spectrum for Living for sharing the organization’s mission to empower adults with developmental disabilities to reach their full potential through quality housing, clinical services, and support for families caring for loved ones with disabilities.
In addition to donating to Spectrum for Living, we are also pleased to support our local communities through donations to the Fair Lawn Food Pantry and All Faiths Food Bank in Sarasota.
As mentioned earlier in this newsletter, October is both Financial Planning Month and the start of Medicare Open Enrollment. Visit our blog for educational resources on these topics, along with additional topics, including retirement, Social Security, market updates and more. Our goal is to provide helpful insights and information to support you in making informed financial decisions.
October is also Cybersecurity Awareness Month, making it an ideal time to revisit the steps you can take to protect your personal and financial information. Our blog features cybersecurity-related articles and videos with helpful alerts and practical tips to help you stay safe. It is especially important to let us know if you receive any suspicious calls or emails related to any of your accounts.
Would you like to switch to paperless Baron Quarterly Statements? Please contact Victoria Cannillo at cannillov@baron-financial.com if you are interested in receiving your statements electronically moving forward.
Thank you for your trust in us. We look forward to staying connected and continuing to support you every step of the way. Please let us know if you have any questions or changes you would like to discuss.
We wish you and your loved ones a healthy, happy holiday season!
Warmest Regards,
Baron Financial Group, LLC
www.baron-financial.com
Please contact us if you would like a copy of our current registration (ADV) with the Securities and Exchange Commission. You can contact our firm (www.baron-financial.com) at 1-866-333-6659 or at info@baron-financial.com. You can also find our ADV through the Investment Adviser Public Disclosure system at www.adviserinfo.sec.gov.
This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of October 17, 2026, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Baron Financial Group to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation, and the possibility of substantial volatility due to adverse political, economic, or other developments. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. Diverse types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio. Historical performance results for investment indices and/or categories generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. Inclusion of index information is not intended to suggest that its performance is equivalent or like that of the historical investments whose returns are presented or that investment with our firm is an absolute alternative to investments in the index (if such investment were possible). Investors should be aware that the referenced benchmark funds may have a different composition, volatility, risk, investment philosophy, holding times, and/or other investment-related factors that may affect the benchmark funds’ ultimate performance results. Therefore, an investor’s individual results may vary significantly from the benchmark’s performance.