Perspectives
Quarterly Market Newsletter
Third QUarter, 2026
The third calendar quarter, historically, has been challenging. September is noted as being typically the toughest month of the year. The saving grace has been that the fourth quarter has been one of the best for stock market returns. Here’s hoping that this year will follow that pattern.
Bonds have been the culprit this quarter. With interest rates rising, bond prices have declined. Higher interest rates are particularly difficult for certain businesses. Those that sell big-ticket items or ones that have bank debt, like small- and mid-sized firms, can be challenged. Â Higher interest rates also become competition for stocks. Some investors get attracted to higher rates instead of taking equity risk.
Equity averages have held up well over this period. However, they mask a great deal of damage. Indices have benefited from having several valuable AI and other high-tech firms. This is where the growth has been and where the action is in the stock market. Outside of these few select companies, others have not fared so well. In fact, 85% are down. Therefore, well-diversified portfolios have suffered.
Since the first two quarters were good, most portfolios are still showing good returns for the year. Hopefully, a strong fourth quarter will add to those gains. To see what we at Riverplace Capital think, see the Forecast section of this letter.
Forecast
Economy
The economy is strong. Recently, industrial production has picked up. The consumer is alive and well and still active. Debt levels are reasonably contained and not hampering consumption. Business profits and growth have been astounding. There is no reason to believe that good profit growth will not continue. Profits have grown at a 30% rate, which will not continue, but even if this growth moderates, further growth is still likely.
Interest rate increases should soon begin to level off. Remember, the cure for higher rates is higher rates. At some point, they become unaffordable to more people and companies, and then borrowing declines. If fewer want to borrow, then the price and rates come back down. We may soon be approaching those levels.
In the meantime, overall growth has not been much affected. Those challenged sectors are being offset by the astounding buildout and growth of artificial intelligence. Hopefully, once interest rates moderate, growth will once again broaden out.
Equities
Lately, stock market returns have been driven by the AI and tech sectors. Almost all other sectors have been in a downturn. Because these two sectors make up such a big part of the popular indices, this downturn has been largely masked. By now, most investors understand what has been occurring. This should be resolved by a broadening out of returns once interest rates moderate.
It would be a mistake to plan on this concentration of returns to continue indefinitely. After all, at some point the valuation of tech and AI firms will become dangerously high. They may be already. If these firms correct, it would be a clear sign that this corrective phase of the stock market is over. Then a broadening trend can take hold.
Fixed Income
The only area of the fixed income market that has been unaffected by rising interest rates has been those with short maturities. Quality has mattered, too. Longer maturity obligation prices have been marked down. This process raises the effective yield for new purchasers of this paper. The only way to escape this is to hold them to maturity. Then they will be redeemed at face value.
Holding bonds to maturity is easier if that time is not too long. That is exactly why we at Riverplace Capital have kept maturities short through this cycle. See the Investment Strategy section of this letter to see what our next moves might be.
Investment Strategy
Equities
We have raised a little cash going into August and September this year. Our next move will be to put it back to work. We anticipate that will happen this month or early in November. Usually, markets that suffer a difficult September begin to recover in October. We believe that precedent will hold true once again.
Areas of the stock market that we believe will be favorable for investment are all those that are out of favor today. In other words, we expect a flip-flop in investment leadership. We shall see. In the meantime, we hold a well-diversified posture. The market will tell us when and where to add.
Fixed Income
Wealth Management
Talk With Us
We are excited about the future of Riverplace and the opportunities this next chapter creates for our clients. Combining Riverplace’s long-standing relationships and client-first culture with Oceanus’s institutional investment experience, research capabilities, and leadership strengthens our ability to serve you for many years to come.
Over the coming weeks, we hope you will plan to visit us and take the opportunity to meet Ryan personally. We believe you will quickly see why we are so enthusiastic.
As always, we welcome your questions, thoughts, and concerns. We value the trust you have placed in us, and we look forward to continuing to serve you, your family, and the goals that matter most to you.
as of 09/30/2026
11.8%
Dow Jones Industrial Average
5.9%
Mid Cap Stocks (S&P 400)
8.8%
NASDAQ Composite
15.6%
Small Cap Stocks (Russell 2000)
12.8%
MSCI EAFE
8.1%
Barclay Aggregated Credit Index
-3.0%
Inflation
3.4%
(Equity indices are nine-month returns excluding dividends)
"People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game"
- Peter Lynch
Notice
We are excited about the future of Riverplace and the opportunities this next chapter creates for our clients. Combining Riverplace’s long-standing relationships and client-first culture with Oceanus’s institutional investment experience, research capabilities, and leadership strengthens our ability to serve you for many years to come.
As always, we welcome your questions, thoughts, and concerns. We value the trust you have placed in us, and we look forward to continuing to serve you, your family, and the goals that matter most to you.