Investment Insights

The last quarter of 2026 is upon us. Equity markets have so far posted another solid year, which is perhaps most remarkable when considering that they have rallied for the past three years. Fixed income returns have been lower, as global bond market yields started to climb once again. The conflict in the Middle East remains unresolved, and U.S. midterm elections are coming up soon.

During 3Q26, the total return for the S&P 500 was 2.3%. Global equities also rose with the MSCI World up 2%. The tech-heavy Nasdaq also rose, posting a 2.6% total return in 3Q26. Looking at other indicators for the third quarter, gold rose (XAU, +3%) while US dollar index (DXY) was basically unchanged. The benchmark 10-year US Treasury yield (UST10) rose during the third quarter, starting at 4.47% and ending at 5.28% (up +81 bps).

Since the second quarter, the flow of oil from the Middle East has improved as major producers have begun using alternate routes over land and via the Red Sea, as well as night passage for tankers through the Strait of Hormuz. Despite the improvement in shipping volumes, oil prices have remained elevated due to uncertainty over the future path of the war, along with the depletion in strategic reserves and much higher shipping costs. As of this writing, WTI is over $90 and Brent is over $100. As well, diesel fuel, which is an important input in good transportation costs, reached an all-time high recently.

All of this has, predictably, further delayed the path back to the Fed’s 2.0% inflation target. Indeed, the FOMC raised rates by +25 bps at its most recent FOMC meeting, citing its desire for a “timelier” return to target inflation. Futures are now pricing in one additional hike for 2026, likely in December, after pricing in two -25 bps cuts at beginning of 2026. The U.S. labor market has stayed resilient, and overall GDP growth remains firm. GDPNow is estimated at 3.7% for 3Q26, after posting a solid 2.2% for 2Q26.

We note that the third quarter market a return to more normalized equity market returns, after an unsustainable rally posted in 2Q26. AI leadership remains intact, with Anthropic targeting an initial public offering (IPO) in excess of $1 trillion. We maintain our view that well-diversified equity portfolios should demonstrate long-term positive performance in tandem with global growth, and we believe that the historic concentration in the large cap U.S. equity indices presents risks that a weakening in growth for the tech sector could lead to outsized pressure in a downturn. Although we acknowledge that technology tends to have better growth prospects than other sectors, we believe a more diversified portfolio is likely to perform better through cycles. Maintaining exposure to fixed income provides steady income and less volatility, although we acknowledge bonds may have less capital appreciation potential given that interest rates continue to be steady to higher as a result of persistent inflation and fiscal pressures.

Following the conclusion of the quarter, our Investment Committee has affirmed the allocations and underlying funds for our managed strategies. For equities, we maintain our quality focus with allocations to U.S. core and large cap, complemented by allocations to international, small/mid-cap, and emerging markets equities. We have placed the U.S. growth manager on our Watch List, given persistent underperformance. We will make a decision regarding the allocation to this fund within the next six months. Fixed income allocations also remain unchanged, although we are considering the addition of more duration given the underperformance of the long end of the curve. For now, we maintain our current allocations, with a view to tactical implementation if the long end continues to sell off. Separately, we also maintained our allocation to real assets, and we continue to look for ways to express views regarding inflation within the existing asset allocation portfolios.

We also would like to inform our clients that Amerant has terminated its partnership with global investment management firm BNY Mellon for consulting on the advisory portfolios. The partnership with BNY Mellon was initiated in order to improve the program design, ensure updates to our program and mandates followed a robust review procedure, and consider recommendations provided by their external manager due diligence team. After managing the advisory portfolios with BNY Mellon’s input for several years, we have decided to resume full control of the portfolios internally. Our program continues to evolve, and future changes may embrace a factor-based, total portfolio approach versus, static asset allocation strategies. We will continue to communicate any future changes to the portfolios to clients going forward.

In the table below, we update our tactical investment views, which represent the investment team’s most recent views based on investment valuations and macro trends. As a reminder, these are not client-specific recommendations, and clients should always prioritize long-term financial goals and objectives when determining their asset allocations. We changed our tactical views modestly in the most recent quarter, but remain constructive overall. We maintain our tilt toward growth in equities and carry in fixed income.

This information is being provided for informational and educational purposes only to support our general market commentary. It should NOT be interpreted as investment advice regarding any specific security or investment strategy. See the disclosures at the end of this presentation for additional important information.

Despite war in the Middle East, U.S. markets have been focused on the implications of AI-led investments. Long-term productivity gains are still expected, but the near-term impact is more on capital expenditures to build out AI-capacity. We have become even more cautious that the elevated level of capex for AI build out may prove to be unsustainable, as the ramp up by hyper-scalers accounted for nearly all of their free cash flow in the most recent quarter and these companies have begun to rely on debt issuance to fund their plans.

We continue to believe broader participation across industries for market leadership would be healthier, and, in our opinion, equities remain vulnerable to shocks given current valuations. That said, the labor market remains healthy, and, as long as consumers have jobs, consumer spending and capex investment are both supportive of positive U.S. GDP growth.

For fixed income, we see risks as balanced. Higher rates have led to lackluster total return through the first half of 2026, but we sense that rates are likely to remain broadly rangebound and look for opportunities to add duration when rates are towards the higher end of the range.

Third Quarter 2026 Returns ⁽¹⁾  

Source: Morningstar, Bloomberg for period ended September 30, 2026. (1) Asset class performance in USD and refers to the following indices: Equities: US Large Caps (S&P 500), Emerging Markets (MSCI EM), Europe (MSCI Europe), Japan (MSCI Japan). Fixed Income: 10-Yr. US Treasuries (BofAML US Treasury Current 10-Yr.), Emerging Markets Sovereign (USD) (EMB ETF), Emerging Markets Sovereign (LCL) (LEMB ETF), US High Yield (BofAML US HY Master II), US Investment Grade (BarCap US Aggregate Bond). (2) Returns for periods ended September 30, 2026. Returns may vary. Past returns are no indication of future performance. Returns are net of fees, and assume reinvestment of dividends, interest, and capital gains. Investing involves risk, including the possible loss of principal. Returns up to February 2020 are based on A shares, which were used on the portfolios up to that month, net of the then standard AMTI 1% management fee. Returns from March 2020 to June 2021 are based on I (or similar) shares, which have no 12b-1 fees, net of a standard AMTI 1.25% management fee. Returns starting July 2021 are based on I (or similar) shares, which have no 12b-1 fees, net of a standard AMTI 1% management fee.

On these tables, you can see index and strategy returns for the first three quarters and year-to-date 2026 figures.

The third quarter of 2026 brought negative returns across fixed income, as higher Treasury yields weighed on all bond segments, while equities were mixed, with gains in Japan and US Large Caps partly offset by modest declines in Europe and Emerging Markets. As a result, all three strategies posted negative returns for the quarter.

Year-to-date, returns remain positive for the Income & Growth and Growth strategies, supported by strong equity returns in the first half of the year, while the Income strategy is slightly negative after the weak quarter. The Income strategy continues to emphasize stable distribution income, while the Growth portfolio has delivered the highest absolute return. All the funds included in the portfolios are hedged back to the U.S. dollar.

Asset Allocation Portfolios returns for periods ended September 30^th, 2026 ⁽¹⁾

⁽¹⁾ Returns for periods ended September 30, 2026. Returns may vary. Past returns are no indication of future performance. Returns are net of fees, and assume reinvestment of dividends, interest, and capital gains. Investing involves risk, including the possible loss of principal. Returns up to February 2020 are based on A shares, which were used on the portfolios up to that month, net of the then standard AMTI 1% management fee. Returns from March 2020 to June 2021 are based on I (or similar) shares, which have no 12b-1 fees, net of a standard AMTI 1.25% management fee. Returns starting July 2021 are based on I (or similar) shares, which have no 12b-1 fees, net of a standard AMTI 1% management fee.

For the one year through 3Q26, the Income Portfolio returned 0.9%, the Income & Growth Portfolio returned 3.9%, and the Growth Portfolio returned 6.8%. The longer-term performance figures remain positive across all strategies.

We take the trust you have placed in us very seriously. In our day-to-day operations, we continue to follow current events and the reactions of the markets closely, and we stand ready to adjust your portfolios accordingly.

To obtain more detailed information on our market views or the performance of your advisory portfolio, please contact your investment consultant at Amerant Investments by calling (305) 460-8599.

Sincerely,

Amerant Investments, Inc.

https://www.amerantinvestments.com/