The Economic Landscape
Here’s the short version. The S&P 500 gained about 2.7% for the quarter and the Nasdaq added about 2.5%, while the Dow slipped about 2.7% and the Russell 2000 of smaller companies fell about 7.5%. Technology did most of the heavy lifting. After a first quarter down 4.6% and a second quarter up almost 15%, the market seemed to be catching its breath.
The bigger news for your wallet came from the Federal Reserve, which raised rates a quarter point on September 16 to a range of 3.75% to 4%. That’s the first increase since 2023, and they’re signaling roughly one more before year end. The reason is inflation. Consumer prices in August were up 3.4% from a year ago, with gasoline up more than 27%.
Making Sense of the Headlines
Two stories dominated the news, and they’re connected. The first is the conflict with Iran. With the Strait of Hormuz still effectively closed, oil has bounced around quite a bit, dropping about 10% in early August on hopes of a deal and then climbing back toward $107 a barrel for Brent by late September.
The second is the bond market. The 10-year Treasury yield moved above 5.3% as the quarter ended, the highest in roughly two decades. Picture a savings account that suddenly pays more than it did last year. Stocks have to work a little harder to earn a place in your money, which is part of why smaller companies struggled. Consumers are feeling it too, with sentiment at a record low in September.
Staying the Course in a Noisy World
The number I keep coming back to this quarter is that ten point gap between the Nasdaq and the Russell 2000. Someone who owned only big technology names had a pretty good summer, and someone who owned only smaller companies did not. A diversified portfolio owns both, so it rarely has the best quarter or the worst one. I know that doesn’t sound exciting, but it’s why I don’t lose sleep when one corner of the market has a bad stretch. It’s like a garden where something is always blooming while something else rests.
And anyone who stepped aside after that rough first quarter missed the best quarter the S&P 500 has had in six years. Nobody rings a bell at the bottom, so I’d rather we stay invested and let the plan do its work.
Year-End Tax Planning: Protecting What You’ve Built
A volatile year can actually be a good one for tax planning, because the same swings that make the headlines uncomfortable can create real opportunities. Nothing here is specific to you, so please treat it as a starting point for a conversation with us and your tax professional.
Start with losses. Smaller companies had a rough quarter, so some taxable accounts may be holding positions worth less than we paid. Selling those can offset gains elsewhere, which is called tax-loss harvesting, as long as we stay clear of the 30-day wash-sale rule. Rebalancing after the run in technology can create gains, so we try to pair those sales with losses or charitable gifts.
If you give to charity, think about how. The standard deduction is high enough now that many people never itemize, so bunching a couple of years of giving into one year, often through a donor-advised fund, can help the total clear that bar. If you’re 70½ or older, a qualified charitable distribution sends money straight from your IRA to charity, counts toward your required minimum distribution, and doesn’t show up as income. Those distributions generally need to happen by December 31.
Roth conversions are worth a look in a lower-income year. You pay tax now in exchange for taxfree growth later, and you can’t undo it. And don’t overlook the simple stuff. For 2026 you can defer up to $24,500 into a 401(k), plus an extra $8,000 if you’re 50 or older, or an extra $11,250 if you’re 60 to 63. The IRA limit is $7,500, with an extra $1,100 if you’re 50 or older. Payroll deferrals have to be done by year end, so check where you stand, and give your health savings account the same look. For gifts to family, the annual exclusion is $19,000 per person.
Every dollar we keep out of taxes stays in your plan, working toward the things you actually want from life. Whatever the market does next, I hope you spend some of this fall with the people and plans your money is supposed to serve. Take the long weekend. Call the friend you keep meaning to call. If you’d like to talk any of this through, call our office at (919) 782-0494 and we’ll find a time.
