Quarterly Market Update

Fidelity's quarterly market outlook, presented by Fidelity's Asset Allocation Research Team (AART) uncovers major themes in the global financial markets, as well as investment insights and market forecasts for the quarter.

Market summary: Asset returns broaden as markets digest geopolitical headlines

Third Quarter 2026

Key Takeaways

• Markets: Markets rebounded and broadened in the second quarter, with gains extending beyond large cap stocks and into small caps, emerging markets, and fixed income.
• Economy: The global economy remained in a mid-cycle expansion, supported by resilient industrial activity, improving labor markets, and broadening corporate earnings growth.
• Investments: Strong AI-driven capital spending and positive earnings momentum supported growth stocks, while gold and other precious metals declined as the Fed adopted a more hawkish tone.
• Valuations: Elevated valuations for AI-linked stocks leave markets open to volatility, while fixed income yields suggest bond valuations are close to long-term averages and may provide solid income as part of a diverse portfolio.

About the Asset Allocation Research Team

AART conducts fundamental and quantitative research to develop asset-allocation recommendations for Fidelity's portfolio managers and investment teams. AART generates insights on macroeconomic, policy, and financial-market trends and their implications for strategic and active asset allocation.

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The Magnificent 7 stocks include Alphabet (parent company of Google), Amazon, Apple, Meta Platforms (parent company of Facebook and Instagram), Microsoft, Nvidia, and Tesla. Due to their size and performance, these stocks accounted for roughly one-third of the S&P 500’s total market capitalization at the end of 2024.

The gold industry is extremely volatile, and investing directly in physical gold may not be appropriate for most investors.

Standard & Poor’s/Loan Syndications and Trading Association (S&P/LSTA) Leveraged Performing Loan Index is a market value-weighted index designed to represent the performance of U.S. dollar-denominated institutional leveraged performing loan portfolios (excluding loans in payment default) using current market weightings, spreads, and interest payments.

The securities of smaller, less well known companies can be more volatile than those of larger companies.

Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign investments are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets.

MSCI Canada Index is a market capitalization-weighted index designed to measure equity market performance in Canada. ​

MSCI EM Latin America Index is a market capitalization-weighted index designed to measure the investable equity market performance for global investors in Latin America.

ICE BofA U.S. High Yield Index is a market capitalization-weighted index of U.S. dollar-denominated, below-investment-grade corporate debt publicly issued in the U.S. market.

MSCI Europe Index is a market capitalization-weighted index that is designed to measure the investable equity market performance for global investors of the developed markets in Europe.

MSCI EM Asia Index is a market capitalization-weighted index designed to measure equity market performance of EM countries of Asia.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk and credit and default risks for both issuers and counterparties.  Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets.​

Bloomberg Long U.S. Government Credit Index includes all publicly issued U.S. government and corporate securities that have $250 million or more of outstanding face value.

Bloomberg U.S. Treasury Inflation-Protected Securities (TIPS) Index (Series-L) is a market value-weighted index that measures the performance of inflation-protected securities issued by the US Treasury.

Bloomberg Commodity Index measures the performance of the commodities market. It consists of exchange-traded futures contracts on physical commodities that are weighted to account for the economic significance and market liquidity of each commodity.​

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