THIS WEEK IN REVIEW:
Oct. 18-24, 2026 The market’s doing the cha-cha in October
Strong earnings can’t overcome AI, interest rates and energy jitters for now
So far, October has been a one-step-forward-and-two-steps-back kind of month. Sure, we hit new records on the S&P 500 and Nasdaq earlier this month, but since then we’ve bobbed around. Despite having a few rebounds, we haven’t achieved new highs and have instead retreated more than 200 points on the S&P 500 and around 1,700 on the Nasdaq.
In a normal run-of-the-mill market, we should be making multiple new highs given that earnings have been really strong this year. (In fact, earnings have been running 25% higher year-over-year every quarter so far in 2026.) But this isn’t a normal year. We’re still involved in a conflict with Iran, which has spiked energy costs, leading to higher inflation. Interest rates have been climbing because of the conflict and inflationary fears, plus our runaway deficit spending and massive $40.4 trillion national debt.
Then there’s AI, which has been driving markets the past few years. Investors have vacillated between concerns one day that companies are overspending on the build-out and the next day that spending isn’t the problem. Add to that the data center controversy and midterm elections, and it’s no wonder the market seems less focused on great earnings.
The macro environment is overwhelming what should otherwise be a really good set-up for a strong run into year-end. But we need to see some of these concerns settled first. One guarantee is that the midterms will be over by early November, so that’s a start. We keep hearing that the Iran conflict will be settled after the midterms, but we were also told nine months ago that it would be over in four weeks. If that happens, we could see inflation and energy prices come down.
The AI trade will likely remain volatile, but it also seems like there may be way more potential upside be had there. We will still have our debt and deficit, so the pressure on interest rates will persist. So far, this year has been pretty good for the markets, and if we can get a few things to go our way (like an end to the Iran conflict and a strong holiday spending season), perhaps we can end the year with new highs. Stay focused, disciplined and informed, and you should be just fine.
The ‘affordability’ discussion
With the midterms just around the corner, “affordability” has become the word of the season. Candidates on both sides are promising to bring down the cost of living, with gas, electricity and grocery staples getting most of the attention. The proposed fixes run the gamut, from easing energy supply disruptions to taking a fresh look at regulations.
Tax cuts are also part of the conversation. Lower taxes can put more money in people’s pockets, but they don’t come free. Government services still have to be paid for, and if revenue drops, that usually means more borrowing. Plenty of administrations have tried to make life more affordable over the years, with mixed results. A lot depends on what the economy and the rest of the world are doing at the time.
Speaking of the rest of the world, the Iran conflict is a big piece of this puzzle. Energy prices have a way of showing up everywhere: at the pump, on your utility bill and in the grocery aisle. If the situation with Iran improves, we could see some relief on energy prices. How much of that trickles down to household budgets is another question.
Then there’s the debt and deficit. Heavy borrowing keeps pressure on interest rates, which matters to anyone with a mortgage, car loan or credit card balance. That also plays into the affordability conversation.
As voters size up the promises they’re being bombarded with, we must look past the quick fixes. Some proposals may offer short-term relief while creating longer-term costs. Getting the cost of living down will likely take work on several fronts at once.