Q3 Market Review
Stock market trends held up through the third quarter. The S&P 500 and Nasdaq remained supported by strength in artificial intelligence and the largest technology companies, helping the major indexes stay near their highs. Gains for the year remained solid, though the advance was driven mostly by a relatively small group of big names. Smaller companies and the broader market lagged behind.
Fewer stocks participated in the rally as the quarter went on. While the main indexes looked steady, the average stock struggled to keep pace. Measures of market breadth weakened, a sign that leadership has become more concentrated. This does not mean the overall uptrend is broken, but it does highlight that not every part of the market is moving higher together.
One of the more notable developments this quarter was the continued move in oil prices. Higher energy prices have added another layer to the inflation picture and could complicate the Federal Reserve's path if the increase proves persistent. At the same time, stronger energy prices can benefit the earnings and cash flows of energy companies, creating an important divergence between sectors. For investors, oil is therefore worth watching not only as a commodity but also as a potential influence on inflation, interest rates and market leadership.
On the economic front, growth remained steady and resilient. The economy continued to expand at a healthy pace, with recent data pointing to solid momentum in the third quarter. Consumers kept spending, particularly on services and everyday goods, which has been a reliable driver of growth. Businesses also continued to invest, especially in technology and equipment. The job market held up well, with unemployment staying low and companies still adding workers at a moderate pace. Corporate profits remained a bright spot, as many companies delivered strong earnings growth and expectations for the full year stayed elevated.
Inflation, however, stayed higher than preferred. It has not yet settled back to the Federal Reserve's longer-term goal, which has kept interest rates elevated and put some pressure on rate-sensitive areas of the market. The combination of persistent inflation and higher oil prices is an important consideration heading into the final quarter.
Looking Ahead: Seasonality Enters the Picture
There is also an interesting historical backdrop as we enter the fourth quarter. According to the Stock Trader's Almanac, the third year of the four-year presidential cycle has historically been the strongest calendar year for stocks. The market is also approaching the historically favorable November–April "Best Six Months" period.
These seasonal tendencies are historical observations, not forecasts. Market conditions, valuations, earnings, monetary policy and investor positioning can all overwhelm seasonal patterns in any individual year. Still, the calendar provides an interesting backdrop: the market enters the final quarter of 2026 during both the historically strongest year of the presidential cycle and the transition toward the market's traditionally stronger six-month period.
Bottom line: The main market trend remains intact and is supported by steady growth and earnings. At the same time, narrower participation, sticky inflation and higher oil prices suggest that investors should continue to pay attention to what is happening beneath the surface of the major indexes. Historical seasonality provides a constructive backdrop for the months ahead, but the underlying trend and breadth of participation remain important indicators to watch as we move into Q4.
Sources
Ameriprise Market Perspectives (data as of Sept. 25, 2026)
StockCharts / Sierra Alpha Research (Sept. 25, 2026 analysis)
FactSet / TheStreet earnings commentary (early September 2026)
Commerce Department / BEA GDP reports (late September 2026)
Goldman Sachs and Morgan Stanley equity strategy notes (Sept. 28, 2026)
Stock Trader's Almanac — presidential cycle and "Best Six Months" historical market seasonality
The information presented in this newsletter is the opinion of West Michigan Advisors and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources but no liability is accepted for any inaccuracies. This is for information purposes and should not be construed as an investment recommendation. Diversification does not guarantee a profit or protect against a loss. Past performance is no guarantee of future performance. West Michigan Advisors is an investment adviser registered with the U.S. Securities and Exchange Commission. Securities offered through Level Four Financial, LLC, member FINRA/SIPC.