“In the short term, the market is a voting machine; in the long term, it is a weighing machine” – widely attributed to Benjamin Graham, often popularized by Warren Buffett
All data as of 11/02/2026, Source: Wells Fargo Investment Institute. An index is not managed and not available for direct investment. Past performance is not a guarantee of future results. [Wells Fargo Investment Institute, Inc. is a registered investment advisor and wholly-owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.]
Market review
A mixed performance month could be a sign of real market changes: As we have stated in the past, September has historically been the worst month for stock market performance, but October has been a time for change in the markets. Looking at the October performance numbers above, what stands out is the positive performance of the Dow Industrials and the S&P 600 small cap index. Looking beyond the indexes we track here and going a bit deeper under the surface of the general market indices, we think the disparity in the markets becomes clearer. In October, the technology-heavy NASDAQ 100 Index fell 6.6%, the Russell 1000 Growth Index declined 6.1%, and the Russell 1000 Value Index gained 4.4%. Since the start of 2026, the Russell 1000 Growth Index is down 0.61%, and the Russell 1000 Value Index is up 22.74% (as of 11/02/2026).
Market Leadership remains questionable: For longer than we can remember, mega-cap technology companies have led the current secular bull market for more than 15 years. Given these outsized gains of the now largest companies in the S&P500 Index, it is possible we can look at the other side of this market equation. We see this as a real possibility for three reasons. First, the cost of the AI buildout has been, and will continue to be, expensive. They are adding significantly to their debt burden while eating into free cash flow. Maybe more significantly, the hyperscaler’s buildout is turning asset-light companies into the owners of real assets that come with a cost of ownership and maintenance. It is unknown if the leadership of these companies can effectively manage these types of assets over the long haul. Finally, the November 2 election has put into question if this buildout continues at a rapid pace, or if perceived headwinds to development become real.
US Government Bond Yields Retreat: The Aggregate Bond Index remains slightly negative for the year, but a drop in yields led to a gain of 2.36% for the index in October. The 10-Year Treasury bond yield pecked at 5.36% on October 7 before ending the month at 4.929%. A pullback below 5% is viewed as a positive. The real question is, was the drop in yields a short-term correction before heading higher, or a move toward lower yields?
Chart #1: www.stockcharts.com Data 04/1/2023 – 11/04/2026 as of 11/05/2026. An index is not managed and not available for direct investment. MA 50 = 50-day moving average MA 200= 200-day moving average
Outlook
Third quarter earnings season outlook: As part of our process, during earnings season we spend some time listening to, and/or reading over, the company reports from some of the most significant publicly traded companies. Why, you may ask? In part because we want to know about the outlook for these companies and their various business segments. We also listen in for the broad economic insights of corporate executives. Thus far, we have heard that the consumer continues to spend money and is not in a bad credit situation. Inflation is a real cost concern, but companies are generally able to pass along cost of goods increases to the consumers.
Earnings, Earnings and Earnings: While we do not know what will happen to the stock market in the short term, we do know that earnings are what drive markets over longer durations of time. So far this year and this quarter, earnings growth has been outstanding. From our point of view, this is a huge big-picture positive, as earnings are what ultimately drive the market.
Macroeconomic pressures: We believe the economy – marked by stubborn 3.7% inflation, 10-year US Treasury bond yields above 4.8%, and wild swings in energy prices – is making expensive stock market prices harder to justify. Typically, when investments like U.S. government bonds offer high guaranteed returns, everyday stocks lose some of their appeal, making pricey shares look much riskier. Because higher interest rates and inflation have been much stickier than many expected, Corporate America is getting hit from two sides: they face higher costs to pay off their debts and unpredictable expenses to run their businesses. As a regular investor, it is crucial to recognize that this could be a long-term shift in the market. Put in plain terms, the days of easy stock market gains could be taking a back seat for the foreseeable future.
Final Thoughts
We do not believe the performance disparities we witnessed in October are mere statistical noise; they represent a fundamental, structural regime shift that has been quietly building throughout 2026. For over a decade, a handful of asset-light, mega-cap technology giants fueled the bull market, leading many investors to view them as infallible compounders. However, as these companies transition into asset-heavy owners of capital-intensive AI infrastructure, they face rising debt burdens, squeezed free cash flows, and unproven operational track records in managing physical assets. Combined with the fresh regulatory and political uncertainties introduced by the November 3rd election, the foundation of tech leadership has grown noticeably fragile.
In contrast, the robust resilience of small-caps and value-oriented sectors highlights where the new market leadership appears to be taking root. This rotation underscores why we have consistently advocated for a diversified, forward-looking portfolio rather than relying on rearview-mirror strategies that chased past winners. As government bond yields begin to retreat and the equity markets reprice risk, the premium on active asset allocation, rigorous fundamental analysis, and disciplined risk mitigation has never been higher.
Our core priority remains positioned on finding true intrinsic value and preserving your wealth from concentrated market vulnerabilities. We view these periods of transition not as a reason for apprehension, but as an excellent environment for uncovering mispriced opportunities that can drive long-term wealth creation. We will continue to monitor these developments closely, adjust our allocations where necessary, and strive to ensure your investment plan remains firmly aligned with your ultimate long-term objectives.
As always, we’re here to help you navigate the path ahead—whether it’s updating your plan, rebalancing your portfolio, or thinking through the next chapter of your financial journey. If you have questions or want to explore your options, don’t hesitate to reach out.
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Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.
Asset allocation and diversification are investment methods used to help manage risk. They do not guarantee investment returns or eliminate risk of loss including in a declining market.All investing involves risks including the possible loss of principal invested. Past performance is not a guarantee of future results.
Index returns are not fund returns. An index is unmanaged and not available for investment.
Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted index of 30 “blue-chip” industrial U.S. stocks.
S&P 500 Index: The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the Index proportionate to its market value.
S&P Midcap 400 Index: The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between the S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
S&P Small-Cap 600 Index: The S&P SmallCap 600 Index consists of 600 domestic stocks chosen for market size, liquidity (bid-asked spread, ownership, share turnover and number of no trade days) and industry group representation. It is a market value-weighted index (stock price times the number of shares outstanding), with each stock’s weight in the index proportionate to its market value.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
MSCI World Index: The MSCI World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance.
MSCI EAFE® Index: The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
The CRB (Commodity Research Bureau) Index measures the overall direction of commodity sectors. The CRB was designed to isolate and reveal the directional movement of prices in overall commodities trades.
Bloomberg Barclays U.S. Aggregate Bond Index: Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based measure of the investment grade, US dollar-denominated, fixed-rate taxable bond market.
NASDAQ Composite Index: The NASDAQ Composite Index measures the market value of all domestic and foreign common stocks, representing a wide array of more than 5,000 companies, listed on the NASDAQ Stock Market.
Russell 2000® Index: The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents.
U.S. Dollar Index (USDX) measures the value of the U.S. dollar relative to majority of its most significant trading partners. The index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies.
Technical analysis is only one form of analysis. Investors should also consider the merits of Fundamental and Quantitative analysis when making investment decision. Technical analysis is based on the study of historical price movements and past trend patterns. There is no assurance that these movements or trends can or will be duplicated in the future.
Stocks offer long-term growth potential, but may fluctuate more and provide less current income than other investments. An investment in the stock market should be made with an understanding of the risks associated with common stocks, including market fluctuations.
Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility.
Investments in fixed-income securities are subject to market, interest rate, credit and other risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the bond’s price. Credit risk is the risk that the issuer will default on payments of interest and/or principal. The risk is heightened in lower rate bonds. If sold prior to maturity, fixed income securities are subject to market risk. All fixed income investments may be worth less than their original cost upon redemption or maturity.
Investing in commodities is not suitable for all investors. The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. The prices of various commodities may fluctuate based on numerous factors including changes in supply and demand relationships, weather and acts of nature, agricultural conditions, international trade conditions, fiscal monetary and exchange control programs, domestic and foreign political and economic events and policies, and changes in interest rates or sectors affecting a particular industry or commodity. Products that invest in commodities may employ more complex strategies which may expose investors to additional risks, including futures roll yield risk.
Robert I. Cahill, Partner
Rob.Cahill@wfafinet.
Jonathan D. Soden, Managing Partner
Jon.Soden@wfafinet.com
Cassandra Queen, CFP®,ChFC®, Senior Wealth Planner
Cassandra.Queen@wfafinet.com
Susan C Schupp, MBA, Senior Wealth Planner
Susan.Shupp@wfafinet.com