Stocks set fresh records this week even as the bond market tested levels not seen in a generation. The S&P 500 notched its first all-time high since August on Tuesday and finished the week up 1.2%, while the 10-year Treasury yield touched 5.35%, its highest since April 2002, before solid auction demand pulled it back to about 5.24% by Friday. The week closed with an unexpected energy headline: President Trump announced an agreement with Russian President Vladimir Putin for Russia to supply nearly 5 million tons of diesel to American and global markets, with the national average for diesel still at $6.23 a gallon. With third quarter earnings season opening Tuesday, September inflation data due Wednesday, and the midterm elections just over three weeks away, the coming stretch will test whether earnings strength can keep outrunning the rising cost of money.
The Bar Is High, and It Has Been Cleared Before
Third quarter reporting season begins in earnest Tuesday, when JPMorgan Chase and Citigroup report before the open, and it arrives with expectations that would have seemed implausible a year ago. FactSet's October 9 update puts estimated year-over-year earnings growth for the S&P 500 at 29.6%, up from 29.2% at the end of the quarter, which would mark a third consecutive quarter of growth above 25%. Analysts raised their estimates during the quarter rather than cutting them, and companies have been unusually upbeat: of the 116 S&P 500 companies that issued quarterly guidance, 72 guided positively, a record-high number per FactSet.
History argues the final figure will be higher still. Actual earnings growth has exceeded the end-of-quarter estimate in 37 of the past 40 quarters, because most companies beat their estimates, and applying the typical improvement leads FactSet to project growth above 35% for the quarter. The 19 companies that have already reported support the pattern, with 16 of them beating estimates. The more important question is breadth. Zacks estimates that excluding the technology sector, third quarter growth for the rest of the index drops to about 14%, and its Banks and Brokerages industry is expected to grow earnings just 2.5% on revenue growth near 10%. Strong results from the AI leaders are largely expected; strength elsewhere would be the news.
Long Yields Hit a 24-Year High, Then the Buyers Returned
The bond market spent the first half of the week testing new ground. The 10-year Treasury yield touched 5.35% during the week, its highest level since April 2002, and the 30-year reached about 5.70% on Wednesday, also a 24-year high. Minutes from the Fed's September meeting, released Wednesday, offered no relief: all 19 policymakers supported last month's quarter-point increase, and most judged that another hike would likely be appropriate by year-end. Late in the week, St. Louis Fed President Alberto Musalem said more firming will be required.
What turned the week was demand. Wednesday's $39 billion sale of 10-year notes cleared at 5.300%, below the 5.317% the market had expected, a sign that buyers were stepping in at these levels, and Thursday's 30-year auction was also well received. Yields eased from their highs, with the 10-year finishing near 5.24% Friday. Markets read the minutes as pointing toward a pause in October and a hike in December, and following the weak September jobs report, futures have scaled back the odds of a move at the October 27 to 28 meeting while still pricing an increase by year-end. That leaves Wednesday's September CPI report with outsized influence on the December decision.
Friday's consumer survey showed the cost of all this to households. The University of Michigan's preliminary October sentiment index fell to 46.3, well below forecasts and its lowest reading since May's record low, with the gauge of current conditions falling sharply.
Diesel From an Unexpected Supplier
Friday afternoon, President Trump announced that a phone call with Russian President Vladimir Putin had produced an agreement for Russia to supply more than 300,000 tons of diesel to the American and global markets immediately, another 500,000 tons in November, 1 million tons after that, and a further 3 million tons over a short period, nearly 5 million tons in total. The Treasury Department immediately issued a temporary license allowing Russian diesel to reach global markets, and it is notably longer than usual: sanctions will not apply until April 2027 to deliveries of Russian diesel loaded onto tankers as of Friday. The President framed the deal around lower prices for farmers, ranchers, and truckers.
The economic case is straightforward. Diesel moves freight and powers agriculture and construction, so its price reaches nearly every physical good, and AAA's national average stood at $6.23 a gallon Friday after peaking above $6.50 on September 22. Diesel futures dipped on the news. The open questions are practical and political. Russia has banned diesel exports since July as Ukrainian strikes on its refineries reduced output by roughly 30% according to the International Energy Agency, although Russia's deputy prime minister said restrictions would be lifted ahead of schedule with supplies to the United States possible in October. The White House did not say who is paying for the fuel or when it arrives. And the deal comes weeks after the President signed a bipartisan Russia sanctions law, drawing criticism from Ukraine's president and from the senior House Democrat on the Joint Economic Committee, while raising doubts about whether new energy sanctions will follow this month.
For perspective, using a standard conversion of roughly 7.5 barrels per ton, the full announced volume equals about 36 million barrels of diesel, on the order of nine days of typical U.S. distillate consumption, spread over several months and shared with global buyers. It may ease prices at the margin, particularly if early cargoes arrive quickly, but it does not by itself resolve the refining shortfall behind record prices.
What History Says About the Year After a Midterm
With the November 3 midterm elections approaching, investors are revisiting one of the more consistent patterns in market history. Since 1950, the S&P 500 has risen in the 12 months following every one of the 19 midterm elections, with an average gain of roughly 15% according to S&P data compiled by Ameriprise. The pattern has held through recessions, wars, and oil shocks.
The usual explanation is uncertainty, and its resolution. Midterm years have historically been the weakest of the four-year presidential cycle, often including a meaningful drawdown, and volatility has tended to build ahead of Election Day before fading once results are known. Late-year seasonality has also been supportive: since 1950, October and November have averaged gains of about 3.0% and 2.7% in midterm years, according to Carson Group research. Once the composition of Congress is settled, the range of possible policy outcomes narrows for two years, and markets have tended to welcome that clarity.
Two cautions belong alongside the history. Nineteen observations is a small sample, and each cycle carried its own circumstances. And this year departs from the typical script: rather than entering the election near a midterm low, the S&P 500 sits near a record, up roughly 14% for the year on a price basis, with the Fed's October meeting landing less than a week before Election Day. History offers a reason not to let election headlines drive portfolio decisions. It does not offer a guarantee.
The Expectations That Are Not Coming Down
Friday's sentiment headline drew the attention, but the more consequential number sat further down the University of Michigan release. Households' expectations for inflation over the next five to ten years rose to 3.5% from 3.4%, the second consecutive monthly increase and above the 2.8% to 3.2% range that held throughout 2024. Year-ahead expectations climbed to 4.7%. Earlier in the week, the New York Fed's survey showed one-year inflation expectations at their highest since 2023.
Short-term expectations tend to track gasoline and diesel prices, so their rise is unsurprising. Long-run expectations are different: they are the gauge the Federal Reserve watches to judge whether households believe inflation will return to target, and they have risen even after September's rate hike. If they continue to drift, the Fed may conclude that one more increase is not enough, which matters directly for long-term Treasury yields already near 24-year highs.
Why it could move markets: a sustained move in long-run expectations would challenge the market's current assumption of a single December hike and a pause thereafter. It would also undercut the view that the 2026 energy shock is a temporary event rather than a lasting change in the inflation regime. One survey does not make a trend, and the preliminary reading will be revised on October 23. It is, however, the kind of slow-moving signal that tends to receive attention only after it has already changed the rate outlook.
Large Caps Lead, Small Caps Lag, Bonds Steady
Large caps carried the week, with the S&P 500 returning 1.2% and value outpacing growth 1.7% to 0.7%. Mid caps rose 1.4%, while small caps slipped 0.9% and developed international markets fell 0.5%, extending the narrow leadership that has defined recent weeks. Bonds gained as yields retreated from their highs late in the week: the long Treasury index rose 0.6% and the broad Aggregate 0.4%, while high yield municipals lost ground. Real estate added 1.3%, gold rose 1.2%, the dollar firmed 0.4%, and Bitcoin fell 3.7%.
| Index | Last Week | YTD 2026 |
|---|---|---|
| Bloomberg US Treasury Bills 1-3 Month | +0.1% | +2.9% |
| Bloomberg US Government/Credit 1-3 Year | +0.2% | +0.9% |
| Bloomberg US Aggregate | +0.4% | -2.5% |
| Bloomberg Municipal 1-15 Year | -0.1% | -2.9% |
| Bloomberg Municipal Bond High Yield | -0.4% | -1.2% |
| Bloomberg US TIPS (Series-L) | +0.3% | -1.8% |
| Bloomberg Global Aggregate | 0.0% | -2.7% |
| Bloomberg US Corporate High Yield | +0.2% | +0.3% |
| ICE US Treasury 20+ Year Index Total Return | +0.6% | -7.5% |
| S&P/TSX North American Preferred Stock Index | +0.5% | +5.2% |
| Bitcoin | -3.7% | -7.9% |
| Invesco DB US Dollar Index Bullish Fund | +0.4% | +7.4% |
| SPDR Gold Shares | +1.2% | -3.0% |
| Index | Last Week | YTD 2026 |
|---|---|---|
| MSCI ACWI IMI Net Total Return | +0.6% | +14.2% |
| MSCI ACWI Net Total Return | +0.7% | +14.3% |
| Russell 3000 Total Return | +1.1% | +14.9% |
| S&P 500 Total Return | +1.2% | +15.1% |
| Russell 1000 Value Total Return | +1.7% | +22.0% |
| Russell 1000 Growth Total Return | +0.7% | +8.6% |
| Russell Midcap Total Return | +1.4% | +15.1% |
| Russell Midcap Value Total Return | +1.5% | +18.3% |
| Russell Midcap Growth Total Return | +1.3% | +4.9% |
| Russell 2000 Total Return | -0.9% | +14.1% |
| Russell 2000 Value Total Return | -0.7% | +17.8% |
| Russell 2000 Growth Total Return | -1.1% | +10.8% |
| MSCI EAFE Net Total Return | -0.5% | +8.7% |
| MSCI Emerging Markets Net Total Return | 0.0% | +23.7% |
| S&P 1500 Real Estate (Sector) Total Return | +1.3% | +6.5% |
Bitcoin weekly return from Bloomberg closing levels of $81,685.89 on October 9, 2026 and $84,841.67 on October 2, 2026. Bitcoin year-to-date return calculated by Vistamark from the October 9, 2026 close and the January 1, 2026 reference price of $88,722. All other figures are total returns through the October 9, 2026 close, sourced from Vistamark Bloomberg internal data systems.
Banks Open the Season, CPI Sets the Tone
The coming week brings the first major test of third quarter earnings and the final consumer inflation reading before the Fed's October meeting, with retail sales and producer prices close behind.
What It All Means for Investors
The week showed both sides of the current market at once. Equities reached a record on the strength of an earnings outlook that keeps improving, with analysts raising estimates and companies guiding higher in record numbers. At the same time, long-term borrowing costs touched levels last seen in 2002, consumer sentiment fell back toward its lows, and inflation expectations kept drifting higher. Stocks are rising because profits are rising, but the rate at which those profits are discounted is rising too.
The weeks ahead bring an unusual concentration of catalysts: the earnings season, a CPI report that could reset the Fed's path, a diesel deal whose effect on prices remains uncertain, and an election that history suggests may matter less for long-term returns than the headlines will imply. In an environment like this, concentration carries more risk than usual. Diversification across sectors, styles, and regions, together with fixed income that now pays meaningful yield, allows portfolios to participate in the earnings story without depending on any single outcome in the weeks ahead.
Built to Look Past the Headlines
Earnings season, inflation data, and an election will each compete for attention over the next month. VistaBuilder™ constructs allocations designed to perform across policy and rate environments rather than any single forecast, and VistaBalancer™ keeps those allocations on target as volatility rises and falls. If the headlines have you questioning your positioning, we would welcome a conversation.
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Founder and CIO of Vistamark; as CIO of Fiducient Advisors, oversaw investment strategy for more than $260 billion in client assets. More about Matthew →
This article is for informational and educational purposes only and does not constitute investment, legal, tax or accounting advice, or an offer or solicitation to buy or sell any security. Views are those of the author as of the publication date and are subject to change. Vistamark Investments is an SEC-registered investment adviser; see our disclosures.
