MAP Views Fourth Quarter 2026

AI-driven corporate earnings and fiscal constraints will keep markets resilient but leave inflation and interest rates biased higher.

• Second-quarter headline S&P 500 earnings rose 51% year over year, or approximately 30% excluding mark-to-market investment gains, led by technology and energy.
• AI-related capital spending represented nearly 2% of U.S. GDP, a share comparable to the railroad expansion of the mid-1800s, making a slowdown in the AI race a risk for both technology stocks and the broader economy.
• Interest rates reached their highest domestic level since before the Global Financial Crisis; Japan's 30-year yield was the highest since 2000, while rates in the United Kingdom, France, and Germany were at levels last seen between 2007 and 2011.
• The Federal Reserve raised rates by 25 basis points on September 16, 2026, but MAP expects no more than one additional hike because a prolonged tightening cycle could damage an economy facing an annual budget deficit above $2 trillion.
• The Treasury's expansion of its buyback program to $6 billion per operation is viewed as unlikely to materially reduce yields, while wider stablecoin circulation could create a natural buyer for Treasury bills.

Takeaway: Investors should expect inflation to remain above the Fed's 2% target and rates to retain an upward bias until fiscal discipline improves, while focusing on quality companies bought at attractive valuations rather than elevated earnings expectations alone.