Weekly Investment Update (10/02/2026)

As the fourth quarter begins, many of the forces that shaped markets over the past several months remain in place. Economic growth is resilient, supported by strong corporate earnings, continued AI-related capital spending, a healthy labor market, and steady consumer spending. At the same time, investors continue to navigate above-target inflation, elevated oil prices and geopolitical risk, and a more hawkish stance from global central banks. Against this backdrop, the most notable market development during the quarter was the rise in global bond yields, driven predominantly by higher real yields rather than an increase in inflation expectations.

Investors are demanding more compensation to hold longer-term bonds than they have in some time. Several factors have contributed, including strong economic growth, elevated debt issuance from mega-cap corporate borrowers, the normalization of term premiums, and concerns surrounding fiscal trajectories. Despite the resulting pressure on valuations, U.S. equities still posted modest gains during the quarter, as strong earnings growth more than offset multiple compression.

Data released this week did little to disrupt these prevailing forces. Second-quarter GDP was revised higher, manufacturing activity remains robust, inflation came in somewhat softer than anticipated despite staying above central-bank targets, and the labor market remains healthy. Upbeat results from companies including Micron and Accenture provide further evidence of AI investment and adoption. While sentiment around the AI trade will continue to ebb and flow with headlines, the underlying spending and earnings trends remain difficult to ignore. Taken together, these dynamics leave us constructive on equities. Short-term-focused headlines will continue to generate volatility across and within asset classes, but for now, the fundamental environment remains supportive of risk assets.

Economic Resilience Continues, With Inflation Still in Focus 

What happened: A data-rich week reinforced the picture of continued economic resilience, supported by strong consumer and business spending, along with inflation that remains elevated, thoughnot accelerating. 

Led by stronger-than-estimated consumer and business investment, second-quarter GDP was revised upward to 2.2% annualized from the earlier estimate of 1.5%. The first-quarter GDP estimate was also revised upward, to 2.5% from 2.1%.   

This week’s data releases showed that these trends continued in the third quarter. Consumer spending in August rose at its fastest pace since March 2025, at 0.9% month-over-month in nominal terms and 0.6% after adjusting for inflation. Construction spending also grew significantly, driven by residential improvements and office construction (the category that includes data centers). 

September manufacturing activity from the Institute for Supply Management (ISM) showed continued expansion, with strong new orders and backlogs although the overall data was slightly below consensus expectations. 

The job market is holding steady but cooled in September. Friday’s employment report showed a lower-than-expected 29,000 added net jobs, coupled with downward revisions to the prior two months’ figures. The unemployment rate increased 0.1% to 4.2%, notably reflecting higher labor force participation rather than job losses, as jobless claims continued to trend lower. Softer job openings and quits confirmed a stable trend relative to a year ago. Given that monthly jobs data can be volatile and subject to several revisions, it’s more valuable to evaluate trends over a multi-month period. From this picture, the labor market is still “slow to hire, slow to fire.”

Inflation remains the primary concern. Summer data showed some moderation, with core PCE — the Federal Reserve’s preferred measure of inflation — rising 3.0% year-over-year in August, below earlier estimates of 3.3%. While the 0.3% miss appears notable, it was partly driven by changes the Bureau of Economic Analysis (BEA) made to their calculation methodology. More recently, however, manufacturing prices paid jumped in September, reinforcing concerns around persistent price pressures. Inflation continues to weigh on consumer sentiment as well with consumer confidence dropping below its 2014 low, although consumer spending has a weaker relationship with survey data in the post-COVID era. Bessemer continues to watch the consumer closely for signs of whether spending could slow due to sentiment, especially given lower income growth, ongoing inflation, and a personal savings rate that’s been trending downward since 2024. 

Why it matters: This week’s data releases continue to point to an overall constructive environment for risk assets, in Bessemer’s view. The macroeconomic backdrop should continue to support earnings growth. The market continues to expect 32% earnings growth in 2026 and 14% growth in 2027, supported by resilient consumer spending and AI-related capex. Valuations have rationalized relative to their year-ago peaks, reflecting a higher cost of capital and a strong but normalizing growth rate after a standout 2026. Against this backdrop, representative model portfolios and certain discretionary strategies remain overweight equities relative to applicable benchmarks. 

Bessemer also continues to believe that data do not support an extended or rapid hiking cycle. The market is increasingly of the same view given softer-than-expected labor market data this week. As of this writing, the market is pricing in a 20% probability of an October rate hike and a 90% chance that the Fed will pause after three additional hikes through 2027, down from a 70% probability of an October hike and 92% probability of four additional hikes through 2027 at the start of the week. 

With expectations of a shallower hiking cycle, Treasury yields have declined from their mid-week peak but are still at their highest levels since 2002.  We view this repricing as being driven not only by inflation and fiscal policy concerns but also by strong economic growth and the potential for productivity enhancements that could enable the economy to bear a higher neutral interest rate (the rate that keeps the economy at full strength with stable inflation). 

Higher starting yields can improve prospective income for fixed-income investors and provide some cushion against future rate increases, but bond prices can still decline if yields rise further, particularly for longer-duration securities. 

IPO Market Volatility Delays a High-profile Debut

What is happening: Oura Inc., the maker of the popular fitness ring, has delayed its IPO, which was set to price this week and aimed to raise more than $2 billion. Investor demand was strong, with the order book four times oversubscribed. Management cited uncertain IPO market conditions as the rationale for the delay. Two other companies postponed listings due to market conditions over the last two weeks: energy equipment maker, Holtec Nuclear, and insurance company Bamboo Insurance Services. Earlier this year, Anthropic and OpenAI delayed their IPOs, with OpenAI having ruled out going public in 2026. This year’s IPO market has been one of the most tepid since the global financial crisis. Just over 100 companies completed IPOs in the U.S. this year, compared to an annual average of more than 200 IPOs over the prior 15 years. A single IPO, SpaceX, accounted for around 70% of all 2026 IPO proceeds to date. 

Why it matters: The pullback in IPOs is both a symptom, and an effect, of an increasingly volatile, sentiment-driven equity market. The two most prominent delays, Anthropic and OpenAI, were at least in part for company-specific reasons (heightened scrutiny of both their economic models and their potential social impact). Others, however, are deterred by volatile conditions, including a Treasury sell-off that has lifted the 10-year yield to its highest level since 2002. While index-level equity market volatility has remained moderate, stock-specific volatility is in the top quartile of the past decade. This dynamic makes final pricing and post-IPO stock performance less predictable, discouraging listings. 

In private markets, this volatility has also attenuated exits and distributions. After a late-2025/ early-2026 rebound, exits have again decelerated in the second quarter of the year. Although most private equity-backed companies exit via sale, IPOs serve as an important barometer for investor appetite and pricing. The causes of the private equity exit slowdown include elevated entry valuations for some companies and vintages, the need for longer hold times for some assets to meet return targets in a new macro and market regime, and an outsized cohort looking to exit at a time when slower fundraising has pressured the amount of available buyer capital. 

However, market, macro, and geopolitical volatility have also been important contributors, in our view. Premium assets continue to transact, but buyer and seller expectations remain difficult to align. We believe these dynamics may improve over time, but the path forward will likely remain uneven.