The third quarter of 2026 was a mixed one for global markets, as investors navigated rising interest rates, geopolitical tensions, and continued economic uncertainty. U.S. stocks managed to finish the quarter in positive territory, gaining 1.41%, while international developed markets returned 0.89%. Emerging markets slipped 0.37%, and both real estate and bonds experienced more significant declines.
Commodities, however, told a very different story, posting strong gains as energy prices climbed. The quarter offered another reminder that different areas of the market don’t always move together, and that market leadership can change quickly.
U.S. Stocks Post Modest Gains
U.S. stocks finished the quarter with a modest gain of 1.41%, outperforming both international developed and emerging markets. However, returns varied considerably depending on company size and investment style.
Large-cap value stocks led the way, returning 2.61%, while large-cap growth stocks gained just 0.92%. Small-cap stocks struggled, declining 7.23%, with small-cap growth stocks falling 9.39%.
This marked a notable shift from the second quarter, when small-cap and growth stocks had been among the strongest performers. The reversal highlighted how quickly market leadership can change and why maintaining exposure across different investment styles and company sizes remains important.
International Markets Deliver Mixed Results
Developed markets outside the U.S. posted a modest positive return for the quarter, with large-cap stocks gaining 0.89%. Value stocks performed particularly well, returning 3.71%, while growth stocks declined 1.89%. Small-cap stocks also held up relatively well, gaining 2.88%.
Emerging markets had a more challenging quarter, with the broad large-cap index declining 0.37%. As in developed markets, value stocks outperformed growth stocks. Emerging market value gained 3.07%, while growth declined 3.59%.
Despite the weaker quarter, emerging markets remained up 29.22% over the preceding 12 months, illustrating the difference between short-term performance and longer-term results.
The variation in returns across countries and investment styles reinforced the importance of global diversification. Markets rarely move in perfect unison, and the regions leading one quarter may not be the leaders in the next.
REITs Struggle While Commodities Surge
Real estate investment trusts (REITs) faced a difficult quarter. U.S. REITs declined 5.72%, while REITs outside the U.S. fell 5.01%. The broader global real estate index posted a loss of 6.03%.
Commodities moved sharply in the opposite direction. The Bloomberg Commodity Total Return Index gained 16.19% for the quarter, driven largely by substantial increases in energy prices.
Gas oil surged 76.86%, heating oil gained 58.98%, and Brent crude oil rose 45.05%. Not all commodities participated in the rally, however. Natural gas declined 13.60%, while lean hogs fell 7.29%.
The dramatic differences in performance were another example of how economic developments can affect individual asset classes in very different ways.
Bonds Decline as Interest Rates Rise
Bond markets experienced a challenging third quarter as interest rates increased across the U.S. and other developed markets.
The U.S. bond market declined 3.51%, while the global bond market outside the U.S. fell 1.79%.
The yield on the 10-year U.S. Treasury rose to 5.29% by September 30, up from 4.44% at the end of June. Rising yields generally put downward pressure on existing bond prices, contributing to the quarter’s negative returns.
Longer-term bonds were particularly affected. The Bloomberg U.S. Government Bond Index Long declined 8.02%, while the Bloomberg Municipal Bond Index fell 6.35%.
Shorter-term investments held up better, with the three-month Treasury bill index gaining 0.89% for the quarter.
The results illustrated how interest rate changes can affect bonds differently depending on their maturity and sensitivity to changing yields.
Keeping the Quarter in Perspective: Plan, Don’t Predict
One of the central messages of this quarter’s report is that the future is inherently unpredictable, and investment strategies should be built with that reality in mind.
In the report’s featured commentary, The Future Is Unknown, So Plan Accordingly, Dimensional Fund Advisors emphasizes the importance of planning for a range of possible outcomes rather than building a portfolio around a single economic or market forecast.
The report points out that over the past two decades, the average annual performance gap between the best- and worst-performing developed stock markets exceeded 50 percentage points. That’s a substantial difference, and one that illustrates just how difficult it can be to predict which markets will lead.
The third quarter provided plenty of reasons for investors to question what might happen next, from rising interest rates and inflation concerns to geopolitical conflicts and changing economic expectations.
But successful long-term investing doesn’t require knowing exactly what comes next.
Instead, maintaining a diversified portfolio, staying disciplined through changing market conditions, and making investment decisions based on personal financial goals rather than short-term headlines can help investors navigate uncertainty.
Markets will always deliver surprises. A thoughtful financial plan is designed to account for that uncertainty rather than depend on getting every prediction right.
