Q3 2026 Schwab Intelligent Portfolios & Market Performance¹

Stocks edged higher in the third quarter while bonds fell. Rising yields and the oil shock associated with the Iran war and Strait of Hormuz restrictions favored energy producers while pressuring rate-sensitive assets and oil-importing markets. In the U.S., a narrow, tech-heavy rally lifted the largest growth companies, while small caps fell sharply. Small caps suffered from structural headwinds, with their relatively high exposure to floating-rate debt and unprofitable companies increasing their sensitivity to higher rates. A surge in oil made energy the top sector worldwide, while technology outside the U.S. lagged. U.S. high-dividend stocks held onto a gain despite a weak September. International developed stocks finished flat after a September reversal erased their summer gains. Emerging markets edged higher, with Brazil up and India down. Real estate declined as borrowing costs rose.

Bonds broadly declined as yields climbed, with the 10-year Treasury yield ending the quarter near 5.3% and the 30-year yield approaching levels last seen in the early 2000s. Inflation-protected bonds also slipped as real yields rose. Markets repriced toward a structurally higher neutral rate as fiscal concerns, persistent inflation and an unresolved Middle East conflict increased uncertainty. The Federal Reserve raised rates by 25 basis points in September, its first hike in three years, citing elevated inflation alongside resilient economic growth. Rising yields pressured bonds broadly, with municipal bonds among the quarter's weakest fixed-income holdings. Cash and ultrashort holdings were among the few assets that avoided losses for the quarter.

Most Schwab Intelligent Portfolios declined in the third quarter, although losses generally narrowed as the portfolios' growth tilt increased, and Global Aggressive Growth portfolios posted modest gains. Bonds, small caps, and real estate detracted, while energy and fundamental indexing helped. Global portfolios generally held up better than their U.S.-focused counterparts. Despite the difficult quarter, most portfolios remained higher year to date, with gains generally increasing alongside their growth tilt, while the most conservative portfolios were roughly flat.

Schwab Intelligent Portfolios is designed to help our clients pursue their objectives over the long term. While market volatility persisted during the third quarter, we know that creating and sticking to a plan, maintaining a diversified approach to investing, and resisting the urge to react to short-term market movements gives investors the best chance of achieving their objectives over time.

We have several online resources available designed to help you achieve your investment goals and we're always available by phone to answer any questions you may have.

Thank you—we look forward to continuing to serve you in the coming quarters and years ahead.