Broadening Market Leadership and Strong Earnings Set Up a Favorable Year-End

1. Market Leadership Is Broadening The 10-year Treasury yield fell nearly 41 basis points last week, declining from 5.36% to 4.95%, and currently sits around 4.98%.¹ The pullback in yields has helped support a broader market, with leadership rotating beyond technology and communication services. Month-to-date, Technology is down 6.5% and Communication Services has fallen 4.8%, while other sectors have performed well.² Consumer Staples and Energy are up approximately 10%, Utilities have gained 7.8%, and Health Care is up 8.4%. Materials, Consumer Discretionary, and Financials have also advanced 5.8%, 5.0%, and 5.0%, respectively.³

This broadening is encouraging after a period when a handful of large technology companies drove much of the market’s gains. We are not looking for technology to lose its long-term leadership, but broader participation would provide a healthier foundation for equities. With yields easing and economic growth holding up, we believe the market is increasingly positioned for more sectors to contribute to returns.

2. Economic Growth Remains Resilient The economic backdrop continues to support the constructive outlook. The Atlanta Fed’s GDPNow tracker is running at 3.5%,⁴ while S&P Global’s U.S. Manufacturing and Services PMI readings came in at 56.0 and 57.9,⁵ respectively, comfortably above the 50 level that signals expansion. The consumer also remains resilient, with initial jobless claims holding near historically low levels. Together, these indicators suggest that economic activity continues to expand at a healthy pace.

3. Earnings Growth Is Strong, While Valuations Have Come Down With approximately 24% of S&P 500 companies having reported, earnings growth is running at 38%, while revenue growth is approximately 11%.⁶ Despite these strong results, the market’s forward price-to-earnings multiple has contracted from roughly 22x to 18.6x. In other words, earnings are growing while valuations have become more reasonable, creating a more attractive setup if the momentum continues.

We believe this combination could support equities as the market moves beyond the near-term uncertainty surrounding the midterm elections. While volatility may persist, the underlying earnings picture remains encouraging. Historically favorable seasonality toward year-end adds another potential tailwind, particularly if results continue to demonstrate strength across sectors.

4. AI Monetization and a Busy Week Ahead Recent developments also suggest that investment in AI infrastructure is beginning to translate into revenue opportunities. SpaceX reportedly saw 830% growth in its AI business, while Meta has also demonstrated progress in monetizing its AI investments. These developments are important as investors look for evidence that the substantial spending on data centers and computing infrastructure can generate meaningful returns.

This week will be particularly important, with roughly 35% of the S&P 500 expected to report earnings.⁷ Microsoft, Alphabet, and Amazon report Wednesday, putting cloud growth and AI monetization in focus. We will be looking for signs of accelerating cloud demand that help justify the scale of investment across these businesses. The Federal Reserve also meets Wednesday. We do not expect a rate hike at this meeting, but the policy decision and commentary will remain important for markets. Overall, we believe strong earnings, resilient economic growth, and broader sector participation provide a constructive setup as we approach the final stretch of the year.

5. Fixed Income U.S. Treasury yields declined across the curve last week reflecting a flight to safety amid a selloff in AI-related equities, driven by concerns that higher funding costs could constrain their debt-driven growth. By Friday’s close, the 2-, 10-, and 30-year yields had fallen by 3, 8, and 10 basis points, respectively.⁸

Credit markets weakened last week, with widening spreads evident across both investment-grade and high-yield segments. Investment-grade spreads were wider by 4 basis points to +123 by the end of the week, while high-yield spreads expanded 3 basis points to +365. In the tax-exempt market, Municipal yields followed Treasuries lower, but rallying at a significantly faster pace as yields declined between 12-23 basis points across the curve.⁹

Stephanie Link’s TV Schedule:

Return for Selected Indices¹⁰

All charts are for illustrative purposes only. Past performance does not guarantee future results. Yield, if shown, are for informational purposes only, may change, and do not guarantee future income, return, or investment results. An index is a portfolio of specific securities (such as the S&P 500, Dow Jones Industrial Average and Nasdaq composite), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index.

Sources:

1. Bloomberg: As of October 26, 2026 ↩︎
2. Bloomberg: As of October 26, 2026 ↩︎
3. Bloomberg: As of October 26, 2026 ↩︎
4. Federal Reserve Bank of Atlanta: As of October 20, 2026 ↩︎
5. Bloomberg: As of October 23, 2026 ↩︎
6. Bloomberg: As of October 26, 2026 ↩︎
7. Bloomberg: As of October 26, 2026 ↩︎
8. Bloomberg: As of October 26, 2026 ↩︎
9. Bloomberg: As of October 26, 2026 ↩︎
10. Bloomberg: As of October 26, 2026 ↩︎

Disclosure
Investment Solutions is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, as a member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors. All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. Investment Solutions and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Investment Solutions and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.