October 2026

As Summer fades into Autumn, the angle of sunlight changes perceptively. As does the rhythm of our daily lives: kids are back in school; Football at all levels and MLB playoffs are in full gear; it even cools off some, finally and thankfully, here in the Southeast. Often, this particular change in season brings with it a change in sentiment in the financial markets from optimism to caution to at times outright fear. In fact, with all due respect to T.S. Eliot, April is not the cruelest month; rather, it is often September.

Always uncertain, the future holds both promise and peril, in different doses at different times. The current moment provides great examples of both. The promise of improvement in all manners of work, entertainment (read “leisure” here), even to enhanced longevity with better quality of life beckons from Artificial Intelligence. That promise could also be a siren’s song that might shipwreck all of mankind. Both can be true at the same time.

Meanwhile, we have to live our lives, hopefully our best lives every day. So what can we point to that we do know and how might that affect at least your financial future?

We know that the Federal Reserve hiked the overnight rate of interest by 0.25% on September 16. While 0.25% (25 bps) might not seem like much, the bond markets perceive the Fed as having embraced a hiking cycle to more restrictive money conditions to combat inflation.

We know that the price of oil has spiked upward again: West Texas Intermediate crude currently trades above $90 per barrel, and Brent above $100. The ostensible cause of the renewed surge in prices can be found in the Strait of Hormuz and the disruption to traffic in the Red Sea caused by Iran’s proxies, the Houthis in Yemen. We feel it in the refined product at the gas pump. We feel it indirectly as an input to food and other industries. Refined gas prices move in lock step with the price of crude. The indirect spill of oil price shocks into the broader economy can be more troublesome. Once prices for certain finished products rise due to the price of oil, when oil prices drop, in our opinion, you should not expect those finished product prices to drop. This persistence can be problematic for a Fed trying to rein in inflation to the 2% target it has not met in over 5 years.

The hiking cycle the Fed has embarked upon could lead to not just a measured amount of desired disinflation but outright demand destruction: that is one peril. The current strength of the domestic economy, nominally running above +5% growth in GDP holds the promise. The amount of capital expenditure, or CapEx as we call it, committed to the further development and support of Artificial Intelligence virtually assures (again in our opinion) continued forward momentum that so far has been relatively unaffected by borrowing rates going up over a full percentage point in less than 6 months.

In the last issue of Insights, we noted that META, AMZN, MSFT, and GOOGL all reported their earnings for the quarter during the last week in April. At the beginning of that week, the estimated growth in earnings for the Standard & Poor’s 500® Index started at 17.8%. By the end of that same week, that growth rate had risen to 21.7%. Look where we find that estimate of growth rate just a couple of weeks ago:

Sources: BlackRock and Bloomberg as of 9/18/2026

Past performance does not guarantee future results. Index performance is for illustration only. Investors cannot invest directly in an unmanaged index. Earnings estimates are forward-looking based on Bloomberg consensus analyst estimates; therefore data is subject to change and revision. The S&P 500 Price Return tracks stock prices only and excludes the reinvestment of dividends and other earnings.

As a result, its representation of market returns may be understated. Please also see Disclosures at end of presentation.

The green line illustrates the expansion from +17.8% to +30.1%; you usually only see expansion like this coming after a recession. Since the price return of the S&P 500® was only +11.4%, the price to earnings (P/E) ratio has fallen significantly (-13.5%). Again, it is usually the opposite calculation: prices fall to compress the P/E ratio, not earnings soaring at nearly triple the rate prices are appreciating.

How long will this expansion of growth continue? Near term, continued expansion seems probable to us given the CapEx commitments ahead. That could change if interest rates start to bite or something else like saturation of compute capacity causes CapEx to slow or even to vanish.

What do we do with all this?

The week after the Fed announced the hike, we decided to take profits rather than continue to admire them and dial down risk overall. We changed allocations as well as holdings in nearly all of our portfolio models. Generally, we moved stocks closer to their benchmark index and lessened interest rate sensitivity a bit in bonds by shortening duration. We maintained overweights to the benchmark in our highest conviction holdings in stocks, though less so. We were already materially shorter in duration than the benchmark in bonds, now more so. For those with exposure to Liquid Alternatives which carry a less than 0.7 correlation in price movements to either stocks or bonds, we made a very minor tweak as that cohort has done its job and then some YTD.

While the S&P 500® Index is up +12.75% YTD, and the benchmark we use of the MSCI All Capitalization World Index (ACWI) enjoys currently a higher +13.03% YTD, there has been a lot of rotation underneath the aggregate averages. September, the cruelest month, saw stock indexes sell off globally: the ACWI was down -1.11% and the S&P 500® also down but less so at -0.35%.

For example, stocks showing broad upwards prices momentum sold off in August to early September, then turned around and retraced about half of the drawdown. This action points to an overall broadening in the stock markets, which we view as healthier than being led higher by just a handful of stocks while the rest do little but watch. Where overweighted exposure to AI exists, we trimmed it back some as a measure of risk management—taking some profits instead of only admiring them.

The Financial sector of stocks came under pressure with interest rates rising faster in the shorter maturities than longer securities. That seems rational to us as a material source of bank earnings comes from making the spread on their ability to borrow short term and lend long term. So we trimmed some of that overweight to financials one of our models maintains.

Bonds had a tough go of it, over the last three months in particular. As measured by the proxy Investment Grade U.S. bond benchmark we use (commonly known as the “AGG”), performance was negative for the quarter (-3.35%) and now negative for the year (-2.78%): the bulk of that decline (-2.30%) in September, the cruelest month. The models with shorter duration, the measure of sensitivity to interest rates, did better as might be expected.

We are sometimes asked why one would continue to own something not doing so well or even with a lower return profile. As we intimated above, stocks historically have had higher returns than bonds, and if you happen to own some alternatives, those are supposed to land in between. Why not just own stocks? Investing involves values that fluctuate and returns that are dispersed. Bonds and alternatives offer refuge from the volatility stocks periodically experience—at times moving in the opposite direction from stock price drawdowns. Owning these different pieces allows your capital that you have invested some preservation as well as the ability to recover more quickly. Should stocks lose 20%, as they have upon occasion in the past, they must go up 25% just to get back to even. Having the diversification allows us to draw capital from sources other than stocks to take advantage of sharp drawdowns by rebalancing, theoretically allowing the compounding of returns more effectively.

The changes we made should withstand better some of the volatility we expect to see between now and the end of the year. When conditions shift again, expect us to shift as warranted, with thoughtful care and precision.

Your Financial Advisor has been fully informed of each change to your portfolio and the reason for that change, and stands ready to share that information with you. Overall year-to-date 2026 has been a period of positive returns for those with us for the entire year-to-date period. Your Advisor can share those results with you, too.

DISCLOSURES:

Past performance does not guarantee future results.

There are no guarantees that a strategy will achieve its investment objective. All investments involve risks that you will lose value including the amount of your initial investment. Investments that offer the potential for higher rates of return generally involve greater risk of loss. Clients should review carefully reports or statements produced by us, such as for performance and cash flows, and compare the official custodial records to any such that we provide. Information we provide could vary from custodial statements based on accounting procedures, reporting dates, or valuation methodologies of certain securities.

Clients’ actual return experiences will vary given the clients’ unique respective needs and circumstances. Your investment returns may differ due to length of time invested, additional cash contributions, or distributions. Clients’ actual returns will be reduced by the investment advisory fees and any other expenses incurred in the management of their portfolios. While Advocacy Wealth maintains an annual standard fee schedule for services as disclosed in its Form ADV Part 2A Brochure, the Firm reserves the right to negotiate fees, so not all clients have the same fee schedule and clients’ net returns experiences will not be uniform. 

All indices cited are unmanaged indices and the reinvestment of dividends, interest, and/or other distributions is assumed for total return results. Indices used as benchmarks cannot be directly invested in by you. Index performance is for illustration only. Index performance does not reflect any management fees, transaction costs or expenses. The S&P 500® Index measures return performance of the 500 or so largest companies in the U.S. by market capitalization (said another way, the higher the company is valued in the market relative to other companies, the higher its percentage share in the index). The ACWI, which is the MSCI All Capitalization World Index and is our primary stock benchmark because it best fits our investment opportunity set in the asset class, is roughly 62.5% U.S., 25% Developed markets outside the U.S, and 12.5% Emerging markets. For the purpose of demonstrating the Investment Grade U.S. bond market, the iShares Core US Aggregate Bond ETF (Ticker: AGG) was used a benchmark example. The AGG ETF is modeled after the Bloomberg U.S. Aggregate Bond Index, an unmanaged index which in turn includes U.S. Investment-grade taxable bonds and is weighted according to amount outstanding; thus, U.S. Treasuries comprise around half the holdings as the Treasury is the largest debtor in the U.S. The AGG ETF’s returns may not match the return of the underlying index on a historic basis as the ETF is subject to fees and expenses. Use of the ETF information is for informative purposes only, and is not reflective of any opinion of the ETF itself, and does not represent an offer to sell or a solicitation to buy said ETF. Data was obtained from a third-party source believed reliable, but its accuracy or completeness is not guaranteed.

References to specific securities/ETFs in our communications are not intended as recommendations of said securities and carry no implications about past or future performance. Views we express represent our assessment of our strategies and the market environment as of the dates represented in the communication and should not be considered investment advice or a recommendation to purchase or sell any specific security or invest in a specific strategy nor used as the sole basis for an investment decision. Views, holdings and holding weights are subject to change. Information about all recommendations made by Advocacy Wealth within the past year for any of its proprietary model portfolios is available upon request.

Charts obtained from third-party sources believed reliable, but their accuracy or completeness is not guaranteed.

International investing: There are special risks associated with international investing, such as political changes and currency fluctuations. These risks are heightened in emerging markets.

Small/Mid-Capitalization investing: Investments in companies with small or mid-market capitalization ("small/mid-caps") may be subject to special risks given their characteristic narrow markets, limited financial resources, and less liquid stocks, all of which may cause price volatility.

Growth Stock Risk: Growth stock investments, whether directly or through ETFs and mutual funds, may be more sensitive to market movements because their prices tend to reflect investors’ future expectations for earnings growth rather than just current profits. 

Sector Risk: To the extent a strategy series has substantial holdings within a particular sector, the risks associated with that sector increase. 

Liquidity / Market Risk: The strategy series may not be able to purchase or dispose of investments at favorable times or prices or may have to sell investments at a loss. Additionally, market prices of investments held by strategy series may fall rapidly or unpredictably due to a variety of factors, including changing economic, political, or market conditions, or other factors including war, natural disasters, or public health issues, or in response to events that affect particular industries or companies.

High-Yield investing: Investments in high yielding debt securities are generally subject to greater market fluctuations and risk of loss of income and principal, than are investments in lower yielding debt securities.

Inflation Protected Bond investing: Interest rate increases can cause the price of a debt security to decrease. Increases in real interest rates can cause the price of inflation-protected debt securities to decrease. Interest payments on inflation-protected debt securities can be unpredictable.

Interest Rate Risk: This risk refers to the risk that bond prices decline as interest rates rise. Interest rates and bond prices tend to move in opposite directions. Long-term bonds tend to be more sensitive to interest rate changes and therefore may be more volatile.

Earnings Growth: A fundamental factor about a company that can assist investors evaluate the health of the business, how fast the company’s profits are growing over a particular time period, as well as the company’s potential stock market performance. EPS Growth or Earnings per Share Growth then evaluates the company’s profitability on a per stock share basis. An Earnings Surprise is when there is a disconnect between the company’s disclosure of reported earnings pers hare and what the markets and analysts anticipated. Earning surprises can be positive or negative events influencing potential stock price movement.