Fourth Quarter 2026 Investment Outlook (Chemung Canal Trust Company)

Summary

• The unemployment rate ended the quarter at 4.2%, showing a resilient U.S. labor market.p.3
• Core PCE inflation increased by 3.0% over the previous 12-month period, still above what policymakers consider appropriate.p.3
• The Federal Reserve raised its policy rate by 0.25%, its first upward adjustment since the middle of 2023.p.3
• The S&P 500 gained 2.3% while the S&P 500 Equal Weight Index declined by about 2.0%.p.3
• The Nasdaq 100 corrected by 10% during the quarter but ended with a positive 0.5% return.p.3
• The Bloomberg U.S. Aggregate Bond Index declined by 3.5% as interest rates rose.p.3
• The S&P Mid-Cap 400 Index declined by 6.4% and the Russell 2000 Index ended 7.2% lower.p.9

Key insights

1. The U-6 unemployment rate currently stands at 7.6%, well below its long-term average of almost 10%.p.4
2. The economy added roughly 152,000 jobs over the last three months.p.5
3. Real GDP grew 2.2% year-over-year, in line with the average growth since the start of the century.p.5
4. August headline CPI rose 3.4% over twelve months, below the May peak of 4.2%.p.6
5. Fed Chair Warsh stressed that inflation has run above the 2% PCE target for 65 consecutive months.p.7
6. The Treasury increased its buyback amount to $6 billion after yields continued higher.p.8
7. Long-term U.S. Treasury Bonds fell by almost 9% during the quarter.p.10
8. The forward price-to-earnings ratio of the S&P 500 declined to 19-times earnings despite a 12.8% rise in the index.p.11
9. S&P 500 earnings are expected to grow 34% this year versus an average of 8.6% over ten years.p.11