Q3 2026 Market Review and Outlook
Global equity markets advanced modestly during the third quarter despite a progressively more challenging macroeconomic and geopolitical backdrop. Markets were weaker through parts of July before rebounding strongly in August, while September was more mixed as investors digested renewed inflation concerns, higher bond yields and escalating geopolitical risk. The MSCI World Index nevertheless finished the quarter 2.0% higher, taking its year-to-date gain to 12.1%. The S&P 500 gained 2.3% and the Nasdaq Composite 2.6%, while performance outside the US was more mixed. The STOXX Europe 600 declined 0.7% and the Nikkei 225 fell 4.1%, while the Hang Seng gained 8.6%.
The larger moves were seen outside equities. Long-term government bond yields rose sharply across developed markets, as seen in Chart 1, with the US 10-year Treasury yield ending the quarter at 5.3%, up from 4.4% at the end of June, and yields in Germany and Japan reaching multi-year highs. Global corporate bonds declined 3.4% as markets reassessed the outlook for inflation, monetary policy and government borrowing. Commodity markets experienced the strongest price moves, with the Bloomberg Commodity Index gaining 16.2%. WTI crude oil rose 38% during the quarter and almost 70% year-to-date, primarily reflecting escalation in the Middle East and disruption to energy exports and shipping through and around the Strait of Hormuz. Gold gained a more modest 3.7%, weakening towards quarter-end as bond yields and the US dollar moved higher.
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