Third Quarter 2026 Asset Allocation Outlook
08/05/2026Third Quarter 2026 Asset Allocation Outlook
"Long-term interest rates have risen by 20 basis points or more in recent weeks, with the 10-year Treasury now yielding 4.68% and the 30-year at 5.23%. ...Long-term interest rates have moved up lately …[as] bond-market vigilantes are finally reacting to $39+ trillion in debt and deficits ...Warsh’s interest in taking the Fed in a new direction, including a smaller balance sheet. ...The shift to “abundant reserves” in 2008 has created a situation where the Fed is now more involved in government finance than ever before. The US Treasury has roughly $900 billion in its Treasury General Account (TGA)." (Warsh Deserves Time dated 08/03/2026 by Brian S. Wesbury – Chief Economist and Robert Stein CFA – Dep. Chief Economist with First Trust Advisors LP)
"In 2025, Americans aged 15 and over spent an average of 16 minutes per day reading for personal interest, compared with 2.6 hours watching TV. The average time spent on leisure and sports activities was highest for those aged 65 and over (7.1 hours per day) and lowest for people between 35 and 44 (3.9 hours per day). Those between 55 and 64 years of age spent an average of 15 minutes per day participating in sports, exercise, and recreation ... People between the ages of 55 and 64 spent about 40 minutes a day socializing and communicating and about 22 minutes a day relaxing and thinking. Those 65 and over spent about 34 minutes a day on each of these activities, while those between the ages of 25 and 34 spent about 15 minutes a day relaxing and thinking in 2025." (Americans age 15 and over read for an average of 16 minutes per day in 2025 dated 07/22/2026 from US Bureau of Labor Statistics)
- We expect no recession over our three-year forecast period, with near-trend GDP growth.
- Economic growth continues to be driven by business investment.
- Inflation will likely remain above the Fed’s long-term target but without further acceleration.
- We expect a cautious Federal Reserve, with inflation limiting the pace and magnitude of future policy easing.
- Geopolitical tensions will remain elevated, contributing to periodic market volatility.
- Elevated valuations among select mega-cap companies, alongside improving earnings prospects across broader segments of the market, should encourage a gradual rotation toward a wider set of equity leaders.
- International developed market equities remain and we introduce allocations to domestic small and mid-caps, given our expectations for a broadening market.
- Gold continues to serve a diversification role in the portfolios.
"Long-term interest rates have risen by 20 basis points or more in recent weeks, with the 10-year Treasury now yielding 4.68% and the 30-year at 5.23%. ...Long-term interest rates have moved up lately …[as] bond-market vigilantes are finally reacting to $39+ trillion in debt and deficits ...Warsh’s interest in taking the Fed in a new direction, including a smaller balance sheet. ...The shift to “abundant reserves” in 2008 has created a situation where the Fed is now more involved in government finance than ever before. The US Treasury has roughly $900 billion in its Treasury General Account (TGA)." (Warsh Deserves Time dated 08/03/2026 by Brian S. Wesbury – Chief Economist and Robert Stein CFA – Dep. Chief Economist with First Trust Advisors LP)
"In 2025, Americans aged 15 and over spent an average of 16 minutes per day reading for personal interest, compared with 2.6 hours watching TV. The average time spent on leisure and sports activities was highest for those aged 65 and over (7.1 hours per day) and lowest for people between 35 and 44 (3.9 hours per day). Those between 55 and 64 years of age spent an average of 15 minutes per day participating in sports, exercise, and recreation ... People between the ages of 55 and 64 spent about 40 minutes a day socializing and communicating and about 22 minutes a day relaxing and thinking. Those 65 and over spent about 34 minutes a day on each of these activities, while those between the ages of 25 and 34 spent about 15 minutes a day relaxing and thinking in 2025." (Americans age 15 and over read for an average of 16 minutes per day in 2025 dated 07/22/2026 from US Bureau of Labor Statistics)