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Hello and welcome to the Dowden Report! I am your host and Financial Advisor, Joshua Dowden.
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Now, on with the Report!
ON THE FINANCIAL FRONT:
America’s biggest banks mark the unofficial kickoff of third-quarter earnings season next Tuesday, and the group’s earnings growth expectations have seen the third-largest upward revision, trailing only technology and energy. Should earnings and margins come through, dip buyers could come in. A healthy IPO pipeline may also be supportive.
THE GOOD:
MIDTERM MAGIC?
Since 1928, Q4 has consistently been the strongest quarter of the year or the S&P 500, with an average gain of 2.9% and positive returns 75% of the time. In midterm election years like 2026, the index’s Q4 performance has been even stronger, with an average gain of 5.6% and positive returns 83% (20 out of 24) of the time.
(Source: Bespoke)
BEST OF TIMES
October 6 kicked off what has historically been the best rolling three-month stretch of the year for the S&P 500. Over the last 25 years, the S&P 500 has posted a median gain of 7.7% in the three months after 10/6, with positive returns 88% of the time.
(Source: Bespoke)
MORE GOOD
Nonfarm Payrolls Increased 29,000 in September
Private sector payrolls rose 46,000 in September but were revised down by 81,000 in prior months. The largest movers in September were in healthcare and social assistance (+23,000), construction (+11,000), and information (-10,000). Manufacturing rose 9,000 while government declined 17,000.
THE BAD:
The ISM Non-Manufacturing Index Declined to 54.9 in September
Slightly lagging the consensus expected 55.0. (Levels above 50 signal expansion; levels below signal contraction.)
The major measures of activity were mixed in September. The business activity index fell to 56.5 from 61.7, and the new orders index declined to 59.8 from 60.9. The employment index increased to 50.1 from 47.8, while the supplier deliveries index rose to 53.2 from 51.3.
The prices paid index rose to 74.0 in September from 72.6 in August.
(Source: First Trust | Data Watch | 105/05/26)
The Consumer Price Index (CPI) Rose 0.6% in September
Matching consensus expectations. The CPI is up 3.7% from a year ago.
Energy prices increased 5.2% in September, while food prices were unchanged. The “core” CPI, which excludes food and energy, rose 0.3% in September, above the consensus expected +0.2%. Core prices are up 2.6% versus a year ago.
Real average hourly earnings—the cash earnings of all workers, adjusted for inflation—declined 0.5% in September and are down 0.7% in the past year. Real average weekly earnings are down 0.1% in the past year.
Translation: Prices are up – Wages are down, and so is productivity.
(Source: First Trust | Data Watch | 10/14/26)
THE UGLY:
The Trouble with Interest Rates
Global markets are adjusting to higher rates, and the International Monetary Fund’s (IMF) latest Global Financial Stability Report, released yesterday in Bangkok, warns that the adjustment may not remain orderly. Elevated public debt, persistent inflation pressures, and growing AI-related corporate borrowing could leave bond markets vulnerable to a sharper repricing.
Public debt across advanced economies sits near levels last seen after World War II and is on track to exceed 100% of global GDP. High rollover needs leave markets exposed to any fiscal or inflation shock, and the IMF notes that unresolved deficits in several large economies are already contributing to higher term premiums.
(Source: LPL Financial | Daily Market Update)
WOODSTOCK-ERA LOWS
Initial jobless claims have been below 200k for four straight weeks, the longest streak since 1969. Claims have averaged 209.4K in 2026, the third lowest annual average since records began in 1967, trailing only 1968 and 1969, when the labor force was less than half its current size. OUCH!!!
(Sources: Dept of Labor, Bespoke)
SUMMARY:
Implications:
Prices are up with energy prices rising 5.2% in September, now up 20.4% versus a year ago. In fact, the 9.1% jump in gasoline prices accounted for more than half of the headline increase in September.
Jobs are still a positive, even though the labor force is shrinking.
Wages and productivity are slowing down.
As always, if it’s time for your review, or you just want to talk, please don’t hesitate to call or message me, I’m always available for you.
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For the Dowden Report I am Joshua Dowden.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested directly.
