Market Insights Recap — Week of October 26, 2026

Hello, I'm Steve Orr, Chief Investment Officer for Texas Capital's Private Bank. 

This month just gets more and more interesting with regards to our investing. What should we be doing with our portfolios?

This Thursday, we're going to get our first estimate of third quarter growth. Our economy is on track to grow about 3.5% in the third quarter, and above 3% this quarter. The last time we were consistently growing 3% or better, 2018. Now 3% growth plus 3.5% inflation equals 6.5% nominal growth. Now setting aside the '21/'22 rebound from virus shutdowns, the last time we had 6% or better nominal growth, 2006. Now let that sink in for a minute. Deficit spending and 0% interest rates after the 2009 housing crisis barely got us to 4% nominal growth. After inflation, that's just treading water for nearly a decade. So in a growing, healthy economy, the demand for credit should push up longer-term rates. And over the long term, those rates tend towards nominal GDP growth. So down the road, we should expect 30-year Treasury rates to reach the neighborhood of 6%, barring some kind of global downturn. Now, we were well on our way to 6% earlier this month. The 30-year Treasury peaked at 5.7% and since fallen down by about half a percent to 5.28%-ish or so.

 Why the drop? Mainly doubts about credit demand from the AI buildout. But those concerns were reinforced last week when Meta (Facebook for your grandparents) announced that all of their spending to build data centers sent their free cashflow negative last quarter for the first time since their IPO in 2012. Another driver was just that bond prices were oversold. From a technical perspective, bond prices had fallen a lot in a short time, and a corrective rally was overdue. Well, we think yields still sit around this 5% level for a few weeks through the midterm elections, through earnings and some of this AI noise sorting itself out. 

Now if you're a long-term investor, this is an OK point to look at getting into bonds and holding them, because that real return above inflation is above historical averages. Now for our total return folks, staying on the defensive is probably a better idea. 

This is the heaviest week for earnings releases; 168 S&P 500 members turn in their quarterly report cards. Three of the Magnificent Seven report, Microsoft and Google on Wednesday and Amazon on Thursday. Now names you know this week: D.R. Horton, Caterpillar, Chevron, ExxonMobil. It's still a bit early in the earnings season, but so far they're growing year over year at a nice 29% clip. That's not quite as high as Wall Street's 33% projection, but most of the AI and tech companies have yet to report; so far, just fine.

So pulling this all together for our portfolios, we're still light on bond exposure. Bonds are getting attractive in real-yield terms for our buy and hold clients. Now stock market's rotating away from tech and AI toward defensives; understandable at this point, given the rising cost of debt to fund the AI buildout. But underlying breadth and volume are holding up. And just ignore the negative headlines. Be patient. Lots of noise through the midterm elections; 'til next time.