Q3 2026 Market Recap: Energy Up, Utilities Crushed, and Software Flipped | The Weekly Wrap
Steve Eisman reviews third-quarter market performance against higher oil prices and interest rates, emerging signs of economic stress, and sharp rotations among sectors and stocks. He concludes that the S&P 500 has become heavily exposed to the AI trade, making it less diversified than it appears, and says short-term Treasuries could provide a place to park money that is less sensitive to AI fluctuations.
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Read the Full SummaryKey Points
Eisman says the 10-year Treasury yield rose from 4.5% to 5.25% during the quarter, with roughly $500 billion in AI debt issuance and the Fed's rate increase contributing to the move.
Eisman says 65% or more of the S&P 500 is tied to AI in some way, and concludes that investing in the index no longer provides diversification.
Eisman reports that mortgage rates reached 7.5%, their highest level since 2023, and that deeply distressed leveraged loans hit their highest level since the pandemic.
He says loans trading below 60 cents on the dollar rose to $65 billion from $40 billion a year earlier, while loans below 80 cents reached $140 billion, up 90%.
Eisman says the S&P 500 rose 2% in the quarter and 12% over nine months, while only 47% of Russell 1000 stocks were above their 200-day moving average.
Intro
Eisman says oil prices and the 10-year Treasury yield are driving day-to-day market moves, with renewed Iran tensions pushing both higher and pressuring stocks.
War in Iran, Interest Rates, & Oil Prices
He flags rising mortgage rates, distressed leveraged loans concentrated in technology and software, and France’s worsening debt position, contrasting it with the dollar and Treasuries’ global role.
Snapshot of the Economy & Key Weaknesses Emerging
Eisman attributes higher Treasury yields to AI-related borrowing and Fed rate hikes, reviews uneven market performance, and argues that AI concentration has made the S&P 500 less diversified than it appears.
An Analysis of the Third Quarter
Energy led as oil surged, while software stocks rallied on a reversal in the AI-disruption narrative; higher rates and recession concerns weighed on banks, housing-linked names, and utilities.
Why I Covered FICO & Sold Glass House Brands
Eisman covered his FICO short after its steep decline and sold Glass House Brands following a sharp drop and its CFO’s resignation.
Mailbag: Diversifying Away From AI
He argues that stocks and corporate bonds offer limited diversification from AI exposure and recommends short-term Treasuries as a safer place to park money away from AI swings.
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