The third quarter is in the books.

And if you only followed the headlines, you'd think it was a rough one.

A Fed rate hike. Bonds still underwater. A frozen housing market. A.I. supposedly coming for everyone's job.

But underneath the noise, the signal looked very different: record incomes, record profits, and stocks that actually got cheaper.

In today's email:

• How stocks and bonds performed through the first nine months of 2026
• What's happening with consumers, companies, and interest rates
• Two big-picture reasons for optimism

As always, I'll wrap up with a few of the best retirement and investing articles I read in the past week.

(Note: Every stat below is sourced. You'll find links to each one right after the Bottom Line.)

***

Before we dive in, did you catch this week's podcast? 👇

First, the Returns

1. Stocks have had a good year (despite the headwinds).

Here are 2026 total returns through September 30:

Stocks:

• S&P 500: +12.71%
• Dow Jones Industrials: +6.98%
• U.S. Small Cap: +13.65%
• International – Developed: +9.89%
• International – Emerging Markets: +22.69%

Bonds:

• U.S. Aggregate Bond Index: -2.78%
• U.S. Treasuries 7–10 Year: -4.63%

Emerging markets are leading the way, and bonds are in the red. More on both below.

Consumers Are in Better Shape Than You Think

2. Incomes and net worth are at record highs.

Real (inflation-adjusted) median household income hit a record $87,460 in 2025, according to the U.S. Census Bureau.

And with wage growth still slightly outpacing inflation, 2026 appears on track for another record.

Household net worth recently hit a new high, too.

Meanwhile, household leverage (liabilities as a percentage of assets) has fallen to 10.3%, the lowest level since the 1960s.

Consumers are in far better shape than the media would have you believe.

3. Housing is the exception.

Redfin defines a buyer's market as one with 10% more sellers than buyers.

As of August, there were 57% more sellers than buyers, the most lopsided market in Redfin's data going back to 2013.

With 30-year mortgage rates back above 7%, a quick turnaround seems unlikely.

If downsizing or relocating is part of your retirement plan, keep in mind that this cuts both ways: it's a tougher market to sell in, but a better one to buy in.

4. Jobs are holding up remarkably well.

Remember the scare earlier this year, when A.I. was supposedly about to take everyone's job?

As of August, unemployment stood at 4.1%, lower than most monthly readings since 2000.

And the prime-age employment ratio (the share of 25–54-year-olds who are working) is above 80%, within two percentage points of its all-time high set in 2000.

The employment picture is about as good as it gets.

Companies Are Thriving

5. Earnings growth is off the charts.

S&P 500 earnings are expected to grow 28.9% in the third quarter, according to FactSet.

If that holds, it'll be the third straight quarter of earnings growth above 25%.

Profit margins have set a new record every quarter this year, climbing from 14.8% in Q1 to 17% today.

Tariffs, oil, and all, corporate America has found a way to earn a healthy profit.

6. Stocks actually got cheaper.

Over time, stock prices tend to follow earnings. But this year, earnings have grown much faster than prices.

The result: the S&P 500's valuation has fallen from about 23 times earnings to about 19, according to J.P. Morgan.

That's back within a historically normal range, and a lot less bubbly than many headlines suggest.

7. Buybacks are hitting new records.

Companies are using those growing profits to buy back their own shares at a record pace, according to Citadel Securities.

Tech leads the way, but more than two-thirds of buybacks are coming from outside the sector.

For long-term investors, that's good news.

When buybacks exceed new share issuance (as they're expected to), each remaining share represents a larger slice of the company and its earnings, without you lifting a finger.

Interest Rates Are the Big Story

8. Yields jumped in September.

The big investing headline last month was rising Treasury yields, alongside a Fed rate hike.

The 10-year yield rose about half a percentage point in September (and more than a full point since late February) to 5.26%, its highest level since 2007.

Higher yields can reflect expectations for Fed policy, inflation, economic growth, or the extra premium investors demand to hold long-term bonds.

So far, the message seems to be that investors expect higher rates to stick around in a resilient economy.

The downside: higher borrowing costs (see mortgage rates above) and pressure on existing bond prices.

The upside for retirees: the cash, CDs, and short-term bonds in your war chest, the money set aside for your next two to three years of spending, are paying meaningfully more than they did a few years ago.

9. Diversification is doing its job.

For most of the decade-plus since the Great Financial Crisis, U.S. large caps (big tech especially) dominated, and diversification was often dismissed.

Large U.S. stocks are still doing well. But this year, emerging markets are leading the way, while small caps and developed international stocks are largely keeping pace.

Nobody knows which region or sector will lead next.

Diversification remains the best way to avoid being overexposed to any single strategy that could struggle for years.

Two Reasons for Optimism

10. Global electricity access has reached 92%.

In the developed world, we take electricity so much for granted that a short outage feels like an emergency.

But globally, access has climbed from 84% in 2010 to 92% today, according to Human Progress. Most of those still without power live in Sub-Saharan Africa.

Meanwhile, 2.2 billion people still lack internet access.

Imagine what happens as those people gain access not just to power, but to the rest of the world's knowledge. Whatever I think might happen, I'm confident I'm underestimating it.

11. Transportation is getting safer.

A study by the Insurance Institute for Highway Safety found that Waymo's driverless vehicles had 68% fewer crashes overall and 81% fewer injury crashes per mile than human drivers in the cities studied.

That doesn't prove every self-driving system will perform this well in every condition. But it's encouraging.

More than a million people die in roadway crashes worldwide every year. Even a meaningful improvement could save hundreds of thousands of lives annually.

And beyond the lives saved, imagine what people will do with the hours they currently spend behind the wheel.

Bottom Line

Nobody knows what happens next.

Inflation could stay stubborn, rates could keep climbing, and the next downturn could be right around the corner.

Or the opposite could happen.

Either way, markets have historically followed the path of human progress, driven by people working to solve big problems every single day.

That's the signal. Most of what's in the headlines is noise.

A retirement plan built on that long-term perspective is what keeps you on track, no matter which way the next quarter goes.

📚 What I've Been Reading

• Why Cash Is Still King for Short-Term Goals (Morningstar)
• 3 IRA Transactions You Must Do Before October 15 (Ed Slott)
• How AI Reliance Can Weaken Critical Thinking and Blur Investment Accountability (CFA Institute)
• IRS Cyber Weaknesses Put Taxpayer Data At Risk Again (Journal of Accounting)
• Simple Math on Driverless Taxis (Bryan Caplan)

Thank you for reading!

Please reply to this email with comments, questions, and/or feedback.

Stay wealthy,

Taylor Schulte, CFP®