Weekly Market Update November 2, 2026

The Federal Reserve kept the benchmark short-term interest rate at 3.75% to 4.00% during its October Federal Open Market Committee (FOMC) meeting. Although the case for a rate increase can be made, especially with inflation accelerating over the late summer and early fall, we did not think the central bank would make a move ahead of the midterm elections. Softer-than-expected job creation in September gave the Fed a reason to pause and allow it to assess more data on inflation and the job market. That said … 

We expect an interest rate increase at the December FOMC meeting. With energy prices still elevated by wars in Iran and Ukraine, our expectation is that inflation will remain above the Fed’s comfort level through the end of this year and into 2027. This would give Federal Reserve policymakers the green light to increase the short-term rate by a quarter point at the year’s final FOMC gathering. Fed Chair Kevin Warsh has noted that the labor market is consistent with full employment, but inflation has been too high for too long. The Fed’s September so-called dot plot, which is a quarterly chart showing where policymakers expect short-term interest rates to go in the coming years, signaled another increase this year. 

Meanwhile, third-quarter earnings season has gone as expected. True, there have been a few notable misses—and the stocks of those companies have felt the ire of Wall Street—but overall profit growth remains strong, with the average rate for the S&P 500 companies hovering around 30%. Even more impressive, the average year-over-year revenue growth rate stands at nearly 13%, which would mark the third-straight quarter of double digit gains. Moving forward, Wall Street will be watching to see if the spending on artificial intelligence (AI) generates enough additional revenue at this juncture to justify the massive debt issued to fund these initiatives. 

Conclusion: The U.S. stock market continues to face obstacles, including stubborn inflation, higher interest rates, and geopolitical turmoil. But with the S&P 500 Index’s valuation, in terms of its price level as a multiple of forecasted earnings, now below both its five- and 10-year averages, there may be opportunities in a market where investors are seeking diversification.

Source: Valueline.com