October 2026 Market Recap

Month in Review

• Leadership reversed sharply in October as investor concerns regarding the sustainability of AI-related capital spending outweighed generally favorable corporate earnings results.
• Index concentration had entered new extremes heading into the month, which may have been one factor associated with the reversal Entering October, the ten largest companies made up 41% of the S&P 500 ($26.8 trillion), and AI-related industries represented roughly 53% of the index. For diversified investors, the S&P 500 has become an increasingly concentrated index.
• Bond markets stabilized after falling -2.6% in September, with the Bloomberg US Aggregate Bond TR Index rising +2.4% in October. The Federal Reserve held interest rates steady in October, and long-term bond yields fell along side cooling inflation data and concerns over AI capex sustainability.

Historic Swings in October

Concerns over the long-term sustainability of the artificial intelligence build-out drove significant changes in equity market leadership during October. With roughly 60% of S&P 500 companies having reported 3Q2026 earnings as of 10/30, investors appear to be focusing on the deceleration of AI-led growth, rather than the very strong 33% year/year growth reported.

The sentiment shift had a significant impact, reversing trends from mid-August. After being led by Magnificent 7/large Technology companies, the Equal Weighted S&P 500 Index (average stock) finished 5.9% ahead of the market-cap weighted S&P 500 Index in October, the second largest monthly outperformance in its history (January 2003 inception). The shift carried over to value and growth stocks as well: the Russell 1000 Value Index finished +10.5% ahead of the Russell 1000 Growth Index in October, the third largest monthly outperformance since inception in January 1987.

Based on earnings reports available as of October 30, 2026, investors appeared increasingly focused on the pace and sustainability of AI-related growth despite generally favorable earnings results.

What’s on Deck for November?

• US elections will take place on 11/3/2026, determining the composition of the US House of Representatives and US Senate.
• 3Q2026 earnings season will wrap up, with roughly 40% of S&P 500 companies left to report earnings. Growth is expected to be robust, but showing a slow-down from previous quarters. Investors will watch changes in growth closely, along with guidance related to AI-capital expenditures.