Your Weekly Update, Dialing Down Risk A Bit, And Let's Talk Some More About Gold

In this weekend's video update I talk about dialing back risk a bit, opportunity at the margin, why gold's been a real drag of late and why the long-term setup remains constructive. 

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Growth Beats, the Fed Pauses, Tech Spending Tested*

Week of October 26, 2026

The economy grew faster than expected in the third quarter, and the Federal Reserve left interest rates unchanged, though two officials voted for an increase. The more important story for markets was inside technology. Several of the largest technology companies reported strong business growth but heavy spending on data centers, and investors sold the companies whose spending is running ahead of the cash their businesses generate. The Nasdaq fell 2%, but most of the stock market rose: most sectors gained, smaller companies rose, and corporate bond markets were calm. Household finances were the weak spot. After adjusting for inflation, incomes fell in September and spending was flat, with savings making up the difference.

The week in brief

• The economy grew at a 3.4% annual rate in the third quarter, faster than the 3.2% expected, led by business investment in technology equipment.
• Excluding a buildup of business inventories, growth was a more modest 1.7%.
• Inflation-adjusted household income fell 0.3% in September, spending was flat, and the saving rate dropped to 3.8%.
• The Fed's preferred inflation measure rose to 3.6% from 3.4%; excluding food and energy, 3.1%.
• The Fed held rates steady, with two officials favoring an increase. Odds of a December increase finished the week near 75%.
• The 2-year Treasury yield fell to about 4.56% and the 10-year to about 4.93%.
• Consumer confidence rose sharply in one major survey, while weekly unemployment claims stayed at 194,000.
• New home sales held up better than other housing data, and mortgage rates eased to 7.24%.
• Stocks were mixed: the S&P 500 fell 0.6% and the Nasdaq 2.0%, while smaller companies rose 1.3%.
• Oil rose about 15% in October; the U.S. benchmark ended near $104.
• Gold fell about 3% to near $3,880, its lowest level in about a year.
• Our internal conditions gauge rose to +5.97 from +4.48, higher than about 93% of the past four years.
• What matters next: Election Day on Tuesday, November 3, the Treasury's borrowing announcement on Wednesday, November 4, and the October jobs report on Friday, November 6.

Growth was strong on the surface

The economy grew at a 3.4% annual rate from July through September, up from 2.2% in the spring. Business investment rose nearly 13%, with spending on computers and related equipment up more than 20%, much of it tied to artificial intelligence. Consumer spending grew 3.8%.

Two items flattered the headline. Businesses added to inventories at a fast pace, and excluding that, growth was about 1.7%. Imports also surged, and much of the equipment businesses bought came from abroad. Housing construction declined for another quarter. Other data were solid: weekly unemployment claims stayed near 194,000, orders for long-lasting goods rose, and a major equipment maker reported a record order backlog driven by demand for power generation.

Households are leaning on savings

September's income and spending report showed the strain behind the growth numbers. Incomes rose 0.2%, less than prices, so inflation-adjusted disposable income fell 0.3%. Spending held roughly flat after adjusting for inflation, and much of the dollar increase went to gasoline. The saving rate fell to 3.8%, its lowest since 2022.

Surveys of how consumers feel diverged. The Conference Board's confidence index jumped to 91.7, well above expectations, with more people describing jobs as plentiful. The University of Michigan's survey, released earlier in the month, remains near record lows. The hard data are closer to the weaker survey: people are still spending, but by drawing down savings rather than from rising real incomes.

Inflation: firmer month to month

The Fed's preferred inflation measure rose 0.5% in September and 3.6% over the past year, the highest since May. Excluding food and energy, prices rose 3.1%. Business surveys in Chicago, Dallas and Richmond all reported input costs rising faster than the prices firms charge their own customers. Over the full third quarter, inflation measured in the growth report was lower than in the spring, because the sharp energy-driven increases of the second quarter did not repeat.

Employment costs rose 3.4% over the past year, unchanged from the prior quarter, and wage growth slowed slightly. After inflation, private-sector wages are down about 0.6% from a year ago.

The Fed paused, with dissent

The Federal Reserve left its benchmark rate at 3.75% to 4.00%. Two officials dissented in favor of an increase. The statement removed language that had pointed toward further increases and said that gathering more information would help the Fed set policy. Chair Kevin Warsh declined to signal what the Fed will do in December, saying he does not believe in giving guidance in normal conditions, and said politics played no role in the decision, which came six days before the midterm elections.

Markets briefly raised the odds of a December increase to about 85% after the meeting, then lowered them to roughly 75% by Friday. The 2-year Treasury yield fell about 13 basis points (0.13 percentage point) over the week and the 10-year about 7, as investors moved toward safety during Friday's technology selloff. Demand from overseas and other large investors was lighter than usual at this week's Treasury auctions.

Technology spending: the market sorted the spenders

Results from the largest technology companies showed strong demand. Cloud businesses grew between roughly 40% and 100% from a year ago, and several companies said they expect to spend more on data centers next year, not less. The market's reaction depended on cash flow. Companies whose data-center spending now exceeds the cash their businesses produce fell sharply; one large platform had its worst day since it went public in 2004. A large chipmaker fell nearly 29% on Friday after a weak forecast. The company that kept its cash flow positive held up much better.

Investors are not questioning artificial intelligence itself so much as how it is paid for. Bond markets for large companies stayed calm and corporate bond spreads narrowed during the week, which suggests the selling reflected stock valuations rather than broader financial stress.

Oil: higher for October, with risks around the election

Oil prices ended October about 15% higher, with the U.S. benchmark near $104 a barrel. Attacks in the Strait of Hormuz added mines to the threats facing shipping, and strikes were reported against Saudi energy facilities. Reports said the U.S. has told allies to prepare for renewed military action after the election, while talks with Iran continue through Qatar. More Gulf oil is reaching markets through pipelines that avoid the strait, but traffic through the strait itself remains a small fraction of normal. Diesel prices rose for a third week. European governments approved an additional release of emergency fuel stocks.

Natural gas prices fell sharply on mild weather forecasts, and gold and silver fell again as investors sold alongside the technology selloff.

Stocks: narrow selling, broad gains

The S&P 500 fell 0.6% and the Nasdaq 2.0%, but an equal-weighted version of the S&P 500 rose 0.8%. Health care, materials, utilities, consumer discretionary, industrials, consumer staples, financials and energy all rose. Communication services and technology fell. Smaller companies gained 1.3%. For a second week, sector leadership broadened through actual gains rather than only through technology's decline.

What our internal gauge says

Our internal conditions gauge rose to +5.97 from +4.48, higher than about 93% of the past four years. It was the first increase after three weekly declines.

One of the 67 measures changed: a market-based measure of expected inflation over the next two years moved back below our threshold, as investors priced a more cautious Fed and slower growth over higher energy costs. Several other measures came close to changing without crossing their lines, most of them on the household side: inflation-adjusted spending, disposable income and new home sales. Business activity and stock market breadth continued to improve.

The gauge continues to read business activity as strong, hiring as stalled, and inflation as firm. This week it showed the divide more clearly: companies are investing heavily, while households are keeping up their spending by saving less.

What we are watching

Tuesday, November 3 is Election Day. Wednesday, November 4 brings the Treasury's quarterly announcement of how much it will borrow and in what form, and Friday, November 6 the October jobs report.

Tuesday, November 10 brings October consumer prices, and Tuesday, November 17 October retail sales.

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This commentary is provided for informational and educational purposes only and does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation regarding any security, sector, or investment strategy. The views expressed reflect the opinions of Private Wealth Advisors as of the date written and are subject to change without notice. Information has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Past performance is not indicative of future results, and all investing involves risk, including the possible loss of principal. Nothing contained herein should be construed as personalized investment, tax, or legal advice.

*The section titled "Growth Beats, the Fed Pauses, Tech Spending Tested" was drafted with the assistance of artificial intelligence tools under the direction and editorial review of Marty Mazorra, Chief Investment Officer of Private Wealth Advisors. All analysis, conclusions, and final content are his own.