Quarterly Investor Letter: Q3 2026

In the third quarter of 2026, long-term bond yields in the U.S., U.K. and Japan reached their highest levels in decades. Persistent inflation, steady economic growth and heavy government and AI-related borrowing all competed for the same pool of capital. In this Quarterly Investor Letter, the Wespath institutional investments team explains what drove rising interest rates, how the Federal Reserve shifted from expected cuts to a rate hike, and what higher for longer means for fixed income investors and long-term portfolios.

The letter also covers the oil price shock tied to the war in Iran and the sharp sector rotation that followed. It looks at small-cap stocks under rate pressure, widening spreads among the lowest-rated high yield bonds, and the AI investment cycle moving from buildout to payback. It ends with an update on our six themes for 2026, including market concentration, active vs. passive investing and private markets.

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