U.S. stocks declined in October, as a sell-off among large technology companies tied to the artificial intelligence (AI) investment theme outweighed gains across much of the market. Beneath the surface, however, performance was notably broad: the vast majority of sectors finished higher, and value stocks outpaced growth stocks by the widest margin in more than two decades. Third-quarter earnings reports have been broadly strong, and the economy expanded at a faster-than-expected pace during the third quarter, though inflation ticked up and hiring slowed sharply in September.
International stocks also declined in October, as the decline in AI-related tech shares weighed on markets abroad. Technology-heavy markets were hit hardest, while a modestly stronger U.S. dollar further weighed on returns for U.S.-based investors.
Bonds surged over the month, posting their strongest monthly gains in several years, as investors sought safety amid stock market volatility and escalating tensions in the Middle East. The Iran conflict and concerns about disruptions to energy supplies pushed oil back above $100 a barrel, adding to inflation concerns. Despite this, Treasury yields moved sharply lower, with the 10-year Treasury yield ending the month just above 4.9%, down from just shy of 5.3% at the end of September. At its October meeting, the Federal Reserve (Fed) left interest rates unchanged as expected, though two officials dissented in favor of a quarter of a percentage point increase.
The year’s final stretch brings a mix of economic, monetary, and political considerations for investors. Stocks and bonds have been volatile following the midterm elections, in which control of both the House and Senate changed parties, creating a divided government in Washington. Fed policy will also stay in the spotlight, as investors expect the central bank to raise rates in December, while tensions in the Middle East could add to volatility. October offered a timely reminder of the benefits of owning a mix of asset classes, as gains in bonds and in broader parts of the stock market helped cushion weakness among some of the larger tech companies and AI hyper-scalers. Maintaining a diversified approach remains important as markets navigate several key developments ahead.
U.S. Stocks (Russell 3000)
-0.64%
11.71%
12.40%
International Stocks (FTSE AW ex U.S.)
-2.86%
10.89%
13.94%
U.S. Bond Market (BBgBarc Int. Gov/Cred)
1.62%
0.11%
0.89%
Cash (ICE BofA ML 3-Mo T-Bill)
0.35%
3.01%
3.68%
Source: Morningstar, Inc. as of 10/31/2026.
Disclosure: Past performance does not guarantee or predict future results. There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. You should not assume that any discussion or information contained in this market commentary serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Investment Advisers (“Raffa”). Raffa Investment Advisers is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. This information was gathered from reliable sources, but we cannot guarantee accuracy or completeness. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated. Raffa actively leverages Artificial Intelligence and Large Language Models within our operations. The use of such technologies, focusing on the safeguard of non-public personal information, protecting of trade secrets, verification of information accuracy, and other pertinent compliance considerations, is outlined in Raffa’s Compliance Manual and acknowledged by Raffa staff. All viewpoints and final content created was reviewed and approved by the Raffa team to verify accuracy, perspective, and compliance with our marketing guidelines.
