Q4 2026 Letter to Clients

It’s hard to believe 2026 is almost behind us!  What strikes me most about the year we’re ending is how much uncertainty looms in the air. Whether it’s the Iran war, inflationary pressure, a job market that looks okay on the surface but many people know is a real challenge, or the markets going all over the place, 2026 has been a year of change and caution overall. Will AI replace a lot of jobs, or was it a lot of hype? Will inflation come down? Are we entering into a recession? What about the midterm elections – how will those impact future policy-making?

Heck, we’re even being told by our government that UFOs are real.

There is much to consider and we’re working hard to make sure we keep on top of all of it, without allowing ourselves to get “analysis paralysis” in the process.

What matters, ultimately, is this: are you moving financially toward your goals? Are your investing, savings, debt and job supporting those goals? That is where we believe we should focus when the day-to-day becomes chaotic.

As your family gets ready for the holidays ahead, please know that we are hard at work to protect and grow your investments, and walk with you along the path set by your financial plan, even as things feel unsettled. We’ve got this! :) 
   

In this letter:

• Changes to our Contact Information
• Autumn “Surge” Meetings with your Advisor
• Q3 2026 Economic and Market Summary
• Goings On Around nVest

Changes to our Contact Information

We moved into new offices in August!

Our new home is in The Exchange Building, a beautiful and historically preserved office complex in the heart of downtown Colorado Springs’ restaurant and financial district.

Construction on our building was finished in 1909 and is the first building of its kind built west of the Mississippi. It was the second building on the site to house the Exchange National Bank (the first one burned down). Founded in 1888, it was of the largest banks in Colorado after the gold and silver mining boom at the turn of the century.

Our beautiful new building is like a time travel back to the earliest days of the 20th century.

It retains nearly all of its historical perfection and beauty, including local granite and marble floors, walls, and stairs, many original fixtures, frosted glass office doors and windows, and even some of the bank vaults and safes still in place! (One of the original bank safes remains in our new office!)

Changing locations is what regulators call a “material change” in our company, and as such, we had to send you an updated client disclosure brochure (called Form ADV Part 2), which we’ve done twice so far by email. If you did not see those communications, you can always view our most current brochure (and other important disclosures) on our website. Click here.

We’ve also updated our phone system for better communication. See below.

Autumn Surge Meetings

Clients who have been with us a while know that we used to have more face-to-face meetings “back in the day”. After the COVID pandemic, that became harder to schedule; for whatever reason, everyone just sort of “got out of the habit” of holding formal meetings.

It was important, however, to still update you on what we were doing for you and how we were handling your investments. So we began recording brief (3-5 minute) video messages to give you an update on your investments and financial plan, show you important account information and offer a way to reply with your questions or comments.

By far, this was the single most popular thing we’ve ever done to improve your experience as a client, and we will continue to make those video messages.

But there is one drawback: in these video messages, we are talking AT you, not TO you. We need to hear from you as much as you need to hear from us.

So we decided to implement a new approach to client meetings. 

Each spring and fall (after taxes are done, and again before the end of the year), we’re asking all of our clients to attend a 45-minute meeting. Because we are covering much of the same service needs, we thought it would make sense to schedule you all together, one meeting after another, over five or six weeks. Then, we could get to work on the things you need done before important deadlines, and not have to bother you all summer, or during the holidays.

Our inaugural SURGE MEETINGS are starting next week for the autumn. Many of you have scheduled a meeting -thank you! For those of you who have not done so, please know that this is a crucial part of our professional relationship, and I will “lovingly nag” you to get with us :) , so please find a time that is convenient and help us do the best job we can for you.

Clients are being sent emails and text messages asking you to book your meeting. If you are not receiving these, please check your Spam folder, and if nothing is there, please let our team know.
  

Market Update

The stock market ended the third quarter a bit higher overall, but it did not feel that way for most investors. A small group of large technology companies tied to artificial intelligence did most of the lifting, but even those companies are starting to see sharp pullbacks whenever other news isn’t pristine. Many other parts of the market were flat or down.

The bigger story this past quarter was interest rates. The yield on the 10-year Treasury note climbed from the mid-4 percent range earlier in the summer to around 5.25 to 5.34 percent by early October. That is the highest it has been since the early 2000s. This can be a complicated subject, but suffice to say: when yields rise that fast, bond prices fall. Portfolios that hold more bonds (often these are those held by conservative investors) felt it first. Stocks that act like bonds, such as utilities and real estate, also came under pressure because their dividends look less attractive when safer government bonds pay more.

(We expect bond prices to correct back upward over the next several weeks, and do not anticipate the need to change many of your bond holdings at this time. Even though they may be down temporarily in sale price, you’re not selling – you’re holding them for the interest payments they provide. And those interest payments have not changed. Be patient on bonds: they are fine and will rebound in short order.)

Energy stocks were the standout. Oil prices stayed elevated after the disruptions tied to the situation with Iran, and that supported the sector. Health care and consumer staples held up better than most. Technology finished the quarter positive but had several sharp down days as questions grew about how all the new AI spending will be paid for.

Those questions are showing up in the credit markets. The cost of insurance against default on bonds issued by the big cloud and AI companies has risen sharply compared with ordinary bank debt. Investors are starting to ask whether the huge amounts being borrowed to build data centers will produce enough cash flow, soon enough, to make the math work. This is not a crisis today, but it is an early warning that the easy-money phase of the AI buildout is quickly fading.

We do not bet against the market. We manage risk by what we own. Right now that means most of our clients are invested in a heavier mix of utilities, health care, energy, and consumer staples. These are businesses people still need when growth slows or borrowing costs stay high. The approach has helped limit the damage from the narrow rally and the jump in yields.

One structural point is worth keeping in mind. The S&P 500 is more concentrated than it used to be. A large share of its gains comes from a handful of companies whose plans depend entirely on AI spending continuing at a very high pace. When an index is that top-heavy, it can mask real problems underneath: the headline number can look fine even while large parts of the economy are not.

Economic Update

The economy is still growing, but the growth is uneven and several important pressures have been building for a while.

Inflation has not settled back to the Federal Reserve’s 2 percent target. In August the Fed’s preferred measure, the personal consumption expenditures (PCE) price index, was up 3.4 percent from a year earlier. The core version, which leaves out food and energy, was up 3.0 percent. Manufacturers are also reporting higher costs. The prices-paid index from the Institute for Supply Management jumped to 77.9 in September, close to the levels seen when the Iran-related energy shock began. Steel, aluminum, tariffs, and fuel are all part of the story.

The Federal Reserve raised interest rates in September for the first time in several years, lifting the target range to 3.75 to 4 percent. Most officials indicated they expect at least one more increase before the end of the year. They described the economy as still expanding and the unemployment rate as roughly steady, but they also said inflation remains too high. For now the path looks like rates staying higher rather than coming down quickly.

Manufacturing has improved after a long stretch of weakness. The main factory survey has been in expansion territory for nine straight months and registered 54.5 in September. Orders and hiring picked up. The same survey, though, showed input costs rising sharply, which could slow or even reverse these gains if energy prices remain elevated. Services, which make up most of the economy, have been noticeably softer. Higher energy and borrowing costs could keep that side from strengthening.

The job market looks different depending on which report you read. Company payroll surveys still show hiring that roughly matches the number of people entering the workforce. Household surveys and what people tell pollsters are weaker. The share of consumers who say jobs are easy to find has fallen, and the share who say jobs are hard to get has risen. Overall consumer confidence dropped to 81.9 in September, the lowest reading since 2014. People across income levels feel less secure about both the present and the next six months.

Household finances show the strain in specific places. About 9.3 million federal student-loan borrowers are in default, and another 1.5 million are close to it. Late payments on credit cards and car loans have risen most among borrowers with lower credit scores. These numbers do not mean banks are in trouble across the board. However, they do mean a meaningful number of families have less room in the budget after higher prices and higher interest costs. Savings cushions are thinner than they were a few years ago.

Housing is the area that concerns us most. Existing-home sales ran at a 3.98 million annual pace in August. The number of homes for sale has risen, and the months of supply reached about 4.9, the highest in more than ten years. Sale prices are still a little above where they were a year ago, but more sellers are cutting asking prices and homes are sitting longer.

Mortgage rates have moved up with Treasury yields. When rates stay high and the Federal Reserve is not in a position to cut them, history shows that prices eventually have to adjust. This is the toughest housing market we have seen since the years after the global financial crisis. Prices have not dropped much yet at the national level. The conditions that produced declines in past cycles are present now.

Business spending on AI data centers and related equipment is still large and is helping keep overall growth positive. At the same time, lenders and investors are beginning to charge more for the risk that the payoff takes longer than expected. The amount of revenue these projects need to generate by the later years of this decade, simply to cover the debt and reward the capital already committed, is becoming unrealistic – more then $4 TRILLION. If AI adoption or pricing falls short of the most optimistic forecasts (there is no moat for these companies), the stocks and bonds tied to that spending have less cushion than the recent market highs suggested. This is why we do not want to buy technology stocks at current prices – we are very concerned that their valuations are unrealistically high.

Looking at the full picture, growth continues, but it is running into higher inflation that has not fully cooled, borrowing costs that have risen quickly, families who feel less confident and have less financial flexibility, a housing market with the slowest sales and highest relative inventory in over a decade, and an AI investment boom whose financing is starting to look more expensive.

None of this requires an immediate recession to create problems for the parts of the market that depend on low rates and uninterrupted high growth. It does mean the margin for error around today’s AI spending plans is smaller than the indexes imply.
  

Goings on Around nVest

Office Hours: With the holidays approaching, here is where our office hours will be affected:
 

November 26 and 27 – CLOSED FOR THANKSGIVING
December 24 and 25 – CLOSED FOR CHRISTMAS
January 1, 2027 – CLOSED FOR NEW YEAR’S DAY

Please note that your individual advisor may have different hours during this time. Reach out to them, or check their calendar, to see their availability.

 

Thank you for your continued trust in us, and HAPPY HOLIDAYS!

Jeremy Torgerson

CEO, & the team at nVest Advisors LLC

 

Footnotes

1. Bureau of Economic Analysis, Personal Income and Outlays, August 2026 (released September 30, 2026): PCE price index up 3.4 percent year-over-year, core PCE up 3.0 percent.
2. Institute for Supply Management, Manufacturing PMI Report, September 2026: headline index 54.5, Prices Index 77.9.
3. Federal Reserve, FOMC statement, September 16, 2026: target range raised to 3.75 to 4 percent.
4. U.S. Treasury yield data, early October 2026: 10-year yield in the 5.25 to 5.34 percent range.
5. The Conference Board, Consumer Confidence Index, September 2026: 81.9, lowest since April 2014.
6. Federal Student Aid data through June 2026: approximately 9.3 million borrowers in default.
7. National Association of Realtors, existing-home sales, August 2026: 3.98 million annual rate, months of supply approximately 4.9.
8. Apollo Global Management research note, September 2026, and related credit-market reports on higher protection costs for hyperscaler bonds.

Past performance is not indicative of future results. This is for informational purposes and does not constitute investment advice. Please consult your advisor for personalized guidance.