Third-Quarter Markets: Energy, Inflation, and Rates
The U.S. economy showed resilience during the third quarter, but the picture was not all rosy. Hiring slowed sharply, while consumer spending picked up. At the same time, the U.S.-Iran conflict pushed fuel prices higher and kept inflation elevated. In September, the Federal Reserve raised rates for the first time since 2023.
For individuals and families considering their financial planning and investment strategy, the quarter offered a reminder that economic strength and market conditions do not always move in the same direction. Fourth Point Wealth is reviewing the developments that shaped the quarter and the events that may continue to influence markets.
Stock Indexes Finish the Quarter Mixed
Stocks ended the quarter modestly higher, even as the 10-year Treasury yield reached its highest level since 2007. Higher yields raised borrowing costs and tested the lofty valuations behind the AI rally.
- The S&P 500 climbed 2.03%.
- The Nasdaq 100 edged up 0.44%.
- The Dow Jones Industrial Average slid 2.70%.
These mixed results reflected a quarter shaped by energy prices, inflation, and Fed policy. For investors, market performance is one part of a broader personal wealth and financial planning discussion.
Diesel Becomes a Key Price Indicator
The U.S.-Iran conflict made diesel the quarter's most telling price. Diesel powers the trucks, trains, ships, and farm equipment that keep the economy supplied, and late in the quarter, it topped $6 a gallon nationally for the first time. The surge reflected more than expensive crude. Ukrainian strikes on Russian refineries, Iranian attacks on tankers, and Moscow's export ban sharply cut global diesel supply.
Unlike gasoline, diesel costs are built into nearly everything consumers buy. Businesses can absorb higher fuel bills only for so long before passing them on through freight charges, food prices, and delivery fees. Consumers kept spending, but they grew more anxious about prices, and the diesel spike may help explain why. Even households that never buy a gallon at the pump are paying for it at the checkout.
Energy Costs Keep Inflation Elevated
Energy costs kept inflation from cooling enough to satisfy the Fed under Chair Kevin Warsh. Set food and energy aside, and the picture looked steadier. Underlying price increases held roughly level for months, a sign that the broader economy was not overheating.
But with demand holding up and fuel costs still climbing, overall inflation remained well above the Fed's 2% goal. By late summer, policymakers concluded that waiting carried more risk than acting. These conditions can affect household budgets, retirement planning decisions, and the way individuals consider their broader financial goals.
The Fed Raises Rates in September
At its September meeting, the Federal Reserve raised rates for the first time in three years, moving the benchmark federal funds rate to 3.75%-4%. The increase itself was modest, but policymakers indicated that another increase could come before year-end and that rates would likely stay high through 2027.
Bond investors responded quickly, pushing long-term Treasury yields to levels not seen since 2007 and lifting borrowing costs across the economy. For savers, this is welcome news. Money market funds, CDs, and short-term bonds now pay noticeably more. Borrowers are facing the opposite, as mortgages and car loans grow costlier.
At Fourth Point Wealth, investment coaching and financial coaching are centered on helping clients understand how changes in interest rates may relate to their individual circumstances, goals, and investment strategy.
Key Events to Watch in the Fourth Quarter
The Fed's late-October and early-December meetings are among the quarter's biggest events, and monthly data releases will continue to offer insights into how inflation affects consumers.
The third quarter showed that a strong economy does not always make for an easy market. As these developments continue, a clear approach to wealth management can help individuals, families, and businesses stay focused on their financial planning priorities.
FAQ
How did major U.S. stock indexes perform during the third quarter?
The S&P 500 climbed 2.03%, the Nasdaq 100 edged up 0.44%, and the Dow Jones Industrial Average slid 2.70%.
Why did diesel prices matter during the quarter?
Diesel fuels trucks, trains, ships, and farm equipment. As diesel prices rose, businesses could face higher costs that may be passed along through freight charges, food prices, and delivery fees.
What did the Federal Reserve do in September?
The Federal Reserve raised the benchmark federal funds rate to 3.75%-4%, its first rate increase in three years. Policymakers also indicated that another increase could come before year-end and that rates would likely stay high through 2027.
How did higher rates affect savers and borrowers?
Money market funds, CDs, and short-term bonds paid noticeably more for savers. Mortgages and car loans grew costlier for borrowers as long-term Treasury yields rose.
What developments are important in the fourth quarter?
The Federal Reserve's late-October and early-December meetings, along with monthly inflation data, are among the key events to follow.
If you would like to review your portfolio, revisit your goals, or discuss how these developments relate to your financial planning, the Fourth Point Wealth team is here to provide personalized guidance and support.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.
