Last month, the Federal Reserve raised interest rates for the first time this cycle. October’s data showed why the Fed is staying cautious and why the path ahead is more complicated. Inflation rose in September, largely due to energy prices, while hiring slowed noticeably. The 10-year Treasury yield crossed 5%. Through it all, corporate earnings have held up, with companies’ summer-quarter results off to a strong start. Here’s what changed as the fourth quarter got underway and what we’re watching through year-end.

Inflation Picks Up, Driven by Energy

September’s inflation report came in warmer than August’s. Headline CPI rose 0.6% for the month, up from 0.4% in August, and 3.7% over the past 12 months. Energy did most of the work: energy prices rose 5.2% in September and 20.4% over the year, with gasoline up 9.1% for the month and 34.2% over the year (U.S. Bureau of Labor Statistics, “Consumer Price Index”).

Underlying inflation is firming more gradually. Core CPI, which excludes food and energy, rose 0.3% for the second straight month, and its 12-month pace edged up to 2.6% from 2.4%. Shelter costs rose 0.4% in September, while food prices were flat (U.S. Bureau of Labor Statistics, “Consumer Price Index”).

Why it matters: A jump in gas prices hits household budgets quickly, but the Fed pays close attention to whether higher energy costs spread into other prices. The minutes from the Fed’s September meeting flagged exactly that concern, noting “the risk that cost increases in certain sectors could lead to broader price pressures” (Board of Governors, “Minutes”).

Hiring Slows as Earlier Gains Are Revised Lower

The labor market lost some of the momentum it had a month ago. Employers added just 29,000 jobs in September, and the unemployment rate ticked up to 4.2%. Revisions also lowered July and August by a combined 60,000 jobs. August’s gain now stands at 133,000 instead of 162,000, and July shifted to a small loss of 10,000. Average hourly earnings rose 3.0% over the year. Health care, construction, and manufacturing added jobs, while financial activities shed 7,000 (U.S. Bureau of Labor Statistics, “Employment Situation”).

Economic growth looked better in hindsight. The BEA’s third estimate revised second-quarter real GDP growth up to 2.2% annually from 1.5%, with consumer spending, investment, and exports all contributing (U.S. Bureau of Economic Analysis).

Put together, the picture is of an economy that grew solidly through the spring but is now hiring more slowly as higher borrowing costs take hold.

The Fed Weighs Its Next Move

The Fed’s next meeting is October 27–28. Minutes from September show that most policymakers expected that “another increase in the target range for the federal funds rate would likely be appropriate by year end,” and that participants “generally assessed inflation risk as skewed to the upside.” They also expected labor market conditions “to remain stable,” a view the September jobs report may test (Board of Governors, “Minutes”).

Officials have signaled that they don’t feel rushed. New York Fed President John Williams suggested there may be “no need for urgency,” and J.P. Morgan Wealth Management’s base case is that the Fed holds steady in October, with the timing of any further increase still open (Klebnikov).

The 10-Year Treasury Yield Crosses 5%

Long-term interest rates kept climbing. The 10-year Treasury yield reached 5.21% on October 13 before easing to 5.09% by October 16. The 2-year yield held between 4.74% and 4.82% over the same stretch, and the 30-year yield sat near 5.4%–5.6% (Board of Governors, “Selected Interest Rates”).

This isn’t only a U.S. story. BlackRock Investment Institute describes a global rate reset driven by competition for capital. It points to France, where the 10-year yield “has jumped about 100 basis points since early August to nearly 5%,” as a reminder that the source of higher yields matters and that higher yields call for selectivity. BlackRock has upgraded U.S. Treasuries, preferring shorter maturities, and also sees “scope for markets to unwind excessive Fed tightening expectations” (BlackRock Investment Institute).

For investors, higher yields remain a double-edged sword. They can pressure bond prices and stock valuations in the short run, but they also offer some of the most attractive bond income in years.

Earnings Season Opens on a Strong Note

The fourth quarter is when companies report how they did over the summer, so the results coming in now cover July through September. Earnings season is just beginning, but the early numbers are encouraging. As of October 16, 9% of S&P 500 companies have reported; 84% have beaten earnings estimates, above the five-year average of 78% and the 10-year average of 77%. Revenue beats are running slightly below average at 67%. The blended earnings growth rate for the July–September quarter stands at 29.0%, with revenue growth of 12.6% (Butters).

Looking further out, analysts expect earnings growth of 28.6% in the fourth quarter and 32.8% for full-year 2026. Valuations remain close to long-term norms, with the forward 12-month price-to-earnings ratio at 19.0, below the five-year average of 19.8 and in line with the 10-year average of 19.1 (Butters).

BlackRock has moved to a neutral stance on U.S. equities but continues to favor AI within it (BlackRock Investment Institute). It also notes that “heavy AI-related issuance is putting pressure on investment-grade bonds,” showing how much capital the AI buildout is drawing from markets.

Private Markets: Secondaries Keep Gaining Ground

The secondary market continues to provide a release valve for private market investors. About six months after a sell-off that wiped more than $1 trillion off listed software stocks, investors looking to sell stakes in software-heavy private funds are finding buyers again. Secondary buyers who would initially consider only portfolios with less than 20% software exposure are now reportedly open to roughly 35%–40%, and Ardian raised a record $30 billion for its latest secondaries fund (Hamlin).

Technology has also become a much bigger part of GP-led secondary activity. PitchBook data shows the IT sector’s share of global GP-led secondary exit value rose from 10.6% in 2023 to 24.6% in 2025, and single-asset continuation fund deal value in IT grew from $1.9 billion to $7.3 billion over the same period (Lai).

In our view, liquidity in private markets is improving, but pricing depends heavily on asset quality, vintage, and how realistically managers have valued their holdings. Manager selection and underwriting remains essential for investment success

What We’re Watching in the Fourth Quarter

1. The Fed’s October 27–28 meeting. The question is whether the Fed holds steady or raises rates again, and what it signals about December.
2. Energy and core inflation. Whether higher energy prices start feeding into broader goods-and-services prices will shape the Fed’s path.
3. Hiring. One soft month doesn’t make a trend, but slower job growth alongside rising inflation is a combination worth watching closely.
4. Long-term yields above 5%. Sustained high yields could weigh on stock valuations, housing, and corporate borrowing.
5. The rest of earnings season. Early beats are encouraging, but expectations are high, so guidance and margins will matter as much as headline results.
6. Event risk. The November midterm elections and global developments, including fiscal pressures abroad, could add short-term volatility.

The Bottom Line

October brought a more mixed set of signals than September: hotter inflation, slower hiring, and long-term yields above 5%. At the same time, corporate earnings remain strong and valuations are close to long-term averages. We see this as an environment that rewards patience and selectivity rather than sweeping changes. We continue to favor quality, broad diversification, and purposeful fixed-income exposure, especially now that bonds offer meaningful income again.

For some investors, alternatives and private market investments may also play a role alongside traditional stocks and bonds. These come with trade-offs, including limited liquidity, higher fees, and wider differences in results between managers, so whether they fit depends on each investor’s goals, time horizon, and liquidity needs.

Have questions about what this means for your portfolio? Schedule a conversation with the Zenith Wealth Partners team →

Works Cited

• BlackRock Investment Institute. “Weekly Market Commentary: French Bonds: A Lesson in Selectivity.” BlackRock, 19 Oct. 2026, www.blackrock.com/corporate/insights/blackrock-investment-institute/global-weekly-commentary. Accessed 20 Oct. 2026.
• Board of Governors of the Federal Reserve System. “Minutes of the Federal Open Market Committee, September 15–16, 2026.” Federal Reserve, 7 Oct. 2026, www.federalreserve.gov/monetarypolicy/fomcminutes20260916.htm. Accessed 20 Oct. 2026.
• Board of Governors of the Federal Reserve System. “Selected Interest Rates (Daily), H.15.” Federal Reserve, 19 Oct. 2026, www.federalreserve.gov/releases/h15/. Accessed 20 Oct. 2026.
• Butters, John. “S&P 500 Earnings Season Update: October 16, 2026.” FactSet Insight, FactSet Research Systems, 16 Oct. 2026, insight.factset.com/sp-500-earnings-season-update-october-16-2026. Accessed 20 Oct. 2026.
• Hamlin, Jessica. “LPs That Want Out of Software Are Finally Finding Buyers.” PitchBook, 1 Oct. 2026, pitchbook.com/news/articles/lps-that-want-out-of-software-are-finally-finding-buyers. Accessed 20 Oct. 2026.
• Klebnikov, Sergei. “Will the Fed Hike Rates in October? 50 Basis Points in Total Hikes Expected, But Fed Officials Say There’s ‘No Need for Urgency.'” J.P. Morgan Wealth Management, 14 Oct. 2026, www.chase.com/personal/investments/learning-and-insights/article/will-the-federal-reserve-hike-rates-at-october-2026-fomc-meeting. Accessed 20 Oct. 2026.
• Lai, Emily. “IT Holds a Bigger Share of Continuation Fund Exits.” PitchBook, 15 Oct. 2026, pitchbook.com/news/articles/it-holds-a-bigger-share-of-continuation-fund-exits. Accessed 20 Oct. 2026.
• U.S. Bureau of Economic Analysis. “GDP (Third Estimate), Industries, Corporate Profits, State GDP, and State Personal Income, 2nd Quarter 2026.” BEA, 30 Sept. 2026, www.bea.gov/news/2026/gdp-third-estimate-industries-corporate-profits-state-gdp-and-state-personal-income-2nd. Accessed 20 Oct. 2026.
• U.S. Bureau of Labor Statistics. “Consumer Price Index: September 2026.” BLS, 14 Oct. 2026, www.bls.gov/news.release/cpi.htm. Accessed 20 Oct. 2026.
• U.S. Bureau of Labor Statistics. “Employment Situation Summary: September 2026.” BLS, 2 Oct. 2026, www.bls.gov/news.release/empsit.nr0.htm. Accessed 20 Oct. 2026.

– Zenith Wealth Partners

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