Market Commentary: Stocks Climb Despite Soaring Yields

Stocks can continue rising despite high yields because resilient nominal growth, strong consumers, robust labor-market data, and favorable presidential-cycle seasonality outweigh the risks from inflation and elevated valuations.

• The S&P 500 gained close to 1% during September, while the Nasdaq reached new highs and the S&P 500 came within 1% of its record despite Treasury yields reaching multi-decade highs.
• October has averaged a 3.0% gain in midterm years and finished higher nearly 74% of the time; November has averaged 2.7% and risen nearly 80% of the time, although October 2018 fell almost 7%.
• August retail sales rose 1.2%, while sales increased at a 4.1% annualized pace from June through August; core sales rose 5.3%, online spending 7.6%, and restaurant sales 10%, or more than 6% after inflation.
• Initial jobless claims were 22% below the comparable week a year earlier and 12% below the 2018–19 benchmark, while the insured unemployment rate was 1.0% versus 1.2% a year earlier.
• Household net worth reached 806% of disposable income in the second quarter of 2026, compared with 759% in the first quarter and 677% in 2019, while liabilities fell to 93% of disposable income and household leverage to 10.3%.
• Equities accounted for a record 38.9% of household net worth, up from 29.6% at the end of 2019, making balance sheets more dependent on stock prices even as leverage is at a six-decade low.

Takeaway: The authors remain bullish on the fourth quarter and into the following year, but warn that a sustained bear market could weaken household wealth, spending, employment, and earnings through a self-reinforcing cycle.