Executive summary

Interest rates

  • Treasury yields declined 30–38 bps across most of the curve during October. The 10-year Treasury yield ended the month at 4.93%, down 35 bps, while the 2-year yield fell to 4.59%.

U.S. equities

  • The S&P 500 ended October at 7,580, down 0.9% for the month but up 11.8% YTD on a total-return basis.
  • The Nasdaq 100 significantly lagged, declining 6.6%, while the equally weighted S&P 500 (RSP) gained 4.95%.
  • Small caps held up relatively well, with the S&P 600 gaining 3.2% and the Russell 2000 advancing 0.6%.

International equities

  • Emerging markets declined 8.1%, while the Hang Seng fell 5.4%, Shanghai declined 6.1%, and Brazil’s Bovespa lost 9.9%.
  • European markets were more resilient, with the DAX gaining 2.5% and the FTSE 100 advancing 1.3%.

Commodities

  • WTI crude surged to $104 per barrel, gaining 15% for the month and 81% YTD. Brent crude ended the month at $118.
  • Gold declined 6.2% to $3,899, while silver fell 18.6%.

Currencies and cryptocurrency

  • The U.S. Dollar Index edged higher by 0.4%.
  • Bitcoin ended the month around $76,800, down 8.2%, while Ethereum declined 16.6%.
  • The Brazilian real came under significant pressure during the final week of October, depreciating against the U.S. dollar as USD/BRL moved from approximately 4.99 to 5.44. The move followed Brazilian election results in which leftist Luiz Inácio Lula da Silva surprised conservative Flávio Bolsonaro, despite trailing after the first round of voting on October 4.

October marked an important shift in market leadership and investor sentiment. Despite continued strength in corporate earnings and extraordinary growth in AI-related investment, investors are becoming increasingly discerning about valuations, capital requirements and the ultimate returns on AI infrastructure spending. The divergence between the Nasdaq 100 and the equally weighted S&P 500 illustrates this changing dynamic. As we look toward 2027, the central question is shifting from how much companies will invest in AI to whether the resulting revenues and earnings will justify the capital being deployed.

Federal Reserve: a pause, but not necessarily the end of the tightening cycle

The Federal Reserve met on October 28 and, in a 10–2 vote, unsurprisingly left interest rates unchanged. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack cast dissenting votes.

As we highlighted in last month’s letter, the probability of a rate hike declined from 70% to 38% by the end of September. The Fed has remained consistent with a measured, data-dependent pace.

During his press conference, Warsh emphasized the underlying strength of both the economy and the labor market. He pointed to strong business investment spending, an improvement in job growth relative to last year, and a decline in jobless claims to what he described as the “lowest level in generations.” However, he also stressed that neither the economy nor the labor market was running too hot.

Warsh’s comments, particularly his conclusion that “policy is working,” suggest that he believes a limited number of additional rate hikes may be sufficient to bring inflation under control without unnecessarily restricting economic activity.

Interestingly, Warsh also highlighted the increasing significance of the 2027 and 2028 Fed meetings, as the number of meetings dedicated to setting monetary policy will decline. In 2027, one of the eight scheduled meetings will focus exclusively on broad monetary policy strategy, without a vote on the federal funds rate or a policy statement. In 2028, policymakers will hold two strategy-focused meetings and six meetings dedicated to setting policy.

While the Fed meeting itself was relatively uneventful, the action in the bond market was anything but.

The 10-year Treasury yield began October at 5.28%, peaked at 5.30% on October 5, and then sharply reversed course, ending the month at 4.93%. For perspective, the 10-year yield was 4.80% on September 1.

The 2-year Treasury yield began October at 4.89% before declining to 4.59% at month-end. For additional context, the 2-year yield peaked at 4.93% on September 28, having started September at 4.40%.

Had we written this letter a couple of weeks earlier, we would have focused on the rise in yields, its impact on the cost of capital and the resulting tightening of financial conditions. In many respects, higher interest rates were doing some of the Fed’s work for it, reinforcing our view that only one or two additional rate hikes might be necessary.

However, the subsequent decline in yields should not be ignored. While it is difficult to attribute the move to any single factor, particularly with oil prices remaining elevated, the direction of interest rates warrants close attention. An optimistic interpretation would suggest moderating inflation expectations, while a more pessimistic interpretation would be that the decline in yields could ultimately signal a decelerating economy and potentially weaker earnings.

The earlier rise in rates is already having an impact on capital markets, particularly on the financing of the AI infrastructure investments we have discussed in previous letters.

SpaceX (SPCX), for example, prepared a $40 billion bond offering in mid-October at yields more than one percentage point above those on its outstanding bonds. Investors are demanding greater compensation for exposure to the AI infrastructure trade, particularly against a backdrop of rising financing costs.

Q3 2026 earnings season: stock dispersion as technology struggles to meet elevated expectations

While third-quarter earnings results have been exceptionally strong on an aggregate basis, equity market performance has left much to be desired. Investors are increasingly questioning whether we have reached peak earnings growth for this cycle.

Earnings growth remains robust, but the probability of deceleration is increasing. One indication is the moderation in 2027 earnings estimate revisions, which have slowed to approximately +2% for next year.

AI capital expenditures will continue to provide a meaningful tailwind to economic growth in absolute terms. However, the rate of growth in AI CapEx is expected to decelerate considerably in 2027, increasing approximately 44% to $1.2 trillion from $800 billion, compared with 96% growth in 2026, from $410 billion to $800 billion.

The distinction between absolute spending and incremental growth is important. The stock market is inherently forward-looking, and valuations across the semiconductor and AI infrastructure industries could come under pressure as the pace of incremental investment moderates, even if overall spending continues to increase substantially.

Through the end of October, approximately 65% of S&P 500 companies had reported third-quarter results.

Q3 earnings scorecard

  • Revenue surprise: +2.0%, compared with a historical average of +1.3%.
  • EPS surprise: +3.9%, compared with a historical average of +4.4%.
  • Consensus EPS growth: +32% for 2026 and +16% for 2027.
  • Consensus revenue growth: +12% for 2026 and +8% for 2027.
  • Trailing 12-month operating profit margin (EBIT): 20.2%.
  • Expected operating profit margins (EBIT): 20.6% for 2026 and 22.8% for 2027.

If there is one illustration that captures the relationship between earnings results and stock performance this quarter, it is the growing dispersion between AI-related mega-cap technology stocks and the broader market. The divergence between the equally weighted S&P 500 (RSP), which gained 4.95%, and the Nasdaq 100 (QQQ), which declined 6.6%, provides a particularly compelling example (RSP has 14% tech weighting vs. 60% in QQQ). The weakness in technology stocks does not necessarily signal a broader deterioration in the equity market. Rather, it suggests that investors are becoming less willing to pay premium valuations for growth that requires increasingly substantial capital investment.

Companies delivering strong results have generally posted only modest gains, while those with earnings disappointments have been punished severely, particularly across the technology sector. The market is becoming increasingly discerning, placing greater emphasis on forward guidance, capital allocation and expected returns on investment rather than simply rewarding headline earnings growth.

Several high-profile examples illustrate this shift:

  • Google (GOOG): Shares suffered their largest one-day percentage decline on record, falling as much as 13% on Thursday October 29th and wiping out approximately $500 billion in market value. A rare earnings miss, concerns about slowing growth in its core advertising business and a sharp increase in AI spending weighed heavily on investor sentiment.
  • Intel (INTC): Shares plunged approximately 30% on Friday October 30th after the chipmaker issued a fourth-quarter forecast well below Wall Street expectations. Management warned that weakness in the personal computer market could persist through the first half of 2027.
  • Amazon (AMZN): Shares declined approximately 7% following its earnings report, as aggressive investment plans overshadowed continued growth in its cloud computing business.
  • ServiceNow (NOW): Shares tumbled more than 25% on Thursday October 29th after the enterprise software company issued a weaker-than-expected forecast for subscription growth, reviving concerns about the potential impact of AI on traditional software businesses.
  • Fortinet (FTNT): Shares plunged approximately 27% following disappointing product revenue growth guidance and a reduction in its full-year services revenue outlook.

CoreWeave: a barometer for the AI infrastructure trade

If one stock has come to symbolize the turmoil in technology stocks during October, it is CoreWeave (CRWV).

CoreWeave is a specialized cloud computing provider whose business model centers on renting out compute capacity for AI workloads. Its shares declined approximately 38% in October as investors increasingly focused on balance sheet concerns, the risk that anticipated demand may fail to materialize, and the enormous capital investment requirements associated with its business model.

The pressure has extended beyond the equity market. CoreWeave’s bonds have fallen sharply, pushing yields toward 15%, while credit default swap spreads have widened.

The bull case

Bulls point to CoreWeave’s exceptionally strong $104 billion backlog, contracts structured around targeted profitability, and approximately $15 billion in available liquidity.

Demand for computing capacity continues to increase, and the company operates in an attractive supply-and-demand environment where access to AI infrastructure remains constrained. From this perspective, CoreWeave is well positioned to benefit from the continued expansion of AI workloads.

The bear case

Bears argue that CoreWeave will need to raise substantial additional capital to fund the capital expenditures required to convert its existing backlog into revenue. The market may be underestimating the financing requirements associated with fulfilling these contracts, while overestimating the ultimate profitability of the AI infrastructure buildout.

There is also a broader concern that growing enterprise and consumer AI revenues may prove insufficient to support attractive returns on the enormous capital expenditures being planned across the industry and the associated debt-service requirements.

Higher financing costs will inevitably pressure expected returns, while a declining share price makes future equity issuance increasingly dilutive. In an adverse scenario where the AI investment cycle falters, the combination of elevated leverage, capital requirements and lower-than-expected demand could leave equity holders with little or no residual value.

We do not have an official investment view on CoreWeave at this time. However, we are monitoring both its equity and credit markets closely. The distinction between demand and profitability is critical. The fact that customers want more computing capacity does not necessarily mean that the infrastructure providers supplying that capacity will generate attractive returns on invested capital. CoreWeave is increasingly serving as a barometer for the broader AI infrastructure trade, and developments in its financing markets may offer an early indication of stress elsewhere in the AI ecosystem.

Anthropic: an extraordinary growth story and a few existential questions

Anthropic released its S-1 registration statement in anticipation of a November IPO. Its growth trajectory remains astounding, and we have seen very few businesses scale at anything approaching this pace.

The company generated $16.3 billion in revenue during the first half of 2026, compared with just $1.2 billion during the comparable period a year earlier. For perspective, full-year revenue in 2025 was $4.6 billion.

Revenue in the third quarter surged 1,127% year over year and 47% sequentially to $17 billion, compared with $1.38 billion in the year-ago period, bringing nine-month revenue to $33.2 billion.

To put this astronomical growth into perspective, it took Anthropic only 5½ years to reach approximately $46 billion in annualized revenue, significantly faster than several established technology giants: Google (14 years), Amazon (17 years), NVIDIA (30 years) and Microsoft (32 years).

While the financial growth is remarkable, some of the more interesting commentary in the S-1 appears in the founders’ letter.

The founders describe Anthropic as a company with the opportunity to create miracles:

“As one of the companies at the very center of that moment, we have a rare opportunity to shape it for the better. Our aim is to help humankind chart a safe course through this technological evolution, open new frontiers of discovery, and bring forth an age of miracles.”

However, the founders are equally candid about the potential risks:

“Concerns have been raised both within our organization and by other researchers, regulators, policymakers, and industry participants that sufficiently advanced AI systems could, if not developed, deployed, and operated with appropriate safeguards, oversight, and security measures, pose catastrophic or existential risks to humanity, particularly if such systems were misused, replicated, weaponized, or allowed to operate with a high degree of autonomy.”

That is quite a risk disclosure.

It does raise the question whether buying a single share of Anthropic, once publicly traded, might be a reasonable hedge against AI taking over the world.

After all, if AI does take over the world, are shareholders better protected than non-shareholders?

Midterm elections: what does it mean for investors?

November 3 marked the latest chapter in the midterm election cycle. As expected, Democrats delivered a decisive victory, regaining control of both chambers of Congress. It was also a good night for pollsters, as a significantly different outcome might have called into question the future of the modern polling industry.

What should we expect from Washington over the next two years? Quite simply, gridlock.

Although Democrats have secured control of Congress, the Senate’s 60-vote threshold to overcome a filibuster, combined with President Trump’s veto power, will make significant legislative changes difficult to achieve.

Should investors make sweeping portfolio changes in response to this major political shift? History suggests this is unwise.

As the United States recently celebrated its 250th anniversary, it is worth remembering that political transitions and changes in power are nothing new. Markets have navigated divided government, shifting political priorities and changes in leadership throughout our nation’s history.

The chart below illustrates the historical performance of the S&P 500 following midterm election lows over the past 40 years. While past performance is no guarantee of future results, history suggests that we are entering what has traditionally been the strongest phase of the four-year presidential election cycle.

Ultimately, investment decisions should be driven by financial objectives, time horizons and individual risk tolerances—not by which political party happens to control Washington.

Important disclosures

This commentary is prepared by Farther Finance Advisors, LLC (“Farther”), an SEC-registered investment adviser, for informational and educational purposes only. Registration does not imply a certain level of skill or training. The information does not consider the investment objectives, financial situation, or particular needs of any specific person and should not be relied upon as personalized investment advice. It does not constitute a recommendation, an offer to sell, or a solicitation of an offer to buy any security, financial instrument, or investment strategy, nor does it constitute legal or tax advice. Opinions, forecasts, and market assessments are current as of the date stated and are subject to change without notice. Forecasts and market-implied probabilities are estimates, not guarantees of future events or results, and actual outcomes may differ materially. Market data reflect the observation dates identified in the commentary. Information is derived from sources believed to be reliable, but its accuracy or completeness is not guaranteed.

References to specific securities, companies, and third-party statements are for discussion and illustrative purposes only and do not constitute investment recommendations or imply endorsement of any third party’s products or services. Farther, its affiliates, and its clients may hold positions in securities mentioned. Any security-price example illustrates price movement and should not be interpreted as an investor’s total return, which depends on purchase price, income received, holding period, and other factors.

Indices are unmanaged, do not reflect the deduction of fees, expenses or taxes, and cannot be invested in directly. “TR” denotes a total-return series, which includes reinvested dividends and other distributions; “PR” denotes a price-return series, which excludes them. Index and commodity figures are shown for illustration and are not the returns of any investment.

Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results, and there is no assurance that any investment or strategy will achieve its objectives or provide positive returns. Fixed-income securities are subject to interest-rate risk: prices generally fall when interest rates rise, and longer-duration securities generally are more sensitive to rate changes. U.S. Treasury backing does not protect against market-price losses if a security is sold before maturity. Please discuss your individual circumstances with your Farther financial advisor before making investment decisions.

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