Cast your mind back to June. The big stock market story going into the third quarter of 2026 was Space Exploration Technologies SPCX, which became the largest IPO in history on the back of an “artificial intelligence meets space” narrative. Coverage focused on valuation and market impact. Index inclusion rules also attracted an unusual level of scrutiny.

Fast forward to the dawn of the fourth quarter of 2026 and the SpaceX story has faded. Despite a market capitalization of roughly $2 trillion, the stock represented just 0.12% of the Morningstar US Total Market Index as of Sept. 25, making it constituent number 135. That’s because of its limited free float, or shares available to investors.

More interesting to me than SpaceX are trends highlighted in Morningstar Market Indexes September 2026 Reconstitution report, such as US value stocks beating growth stocks and micro-caps outperforming so far in 2026. Meanwhile, uncertainty swirls around interest rates and AI. Midterm elections loom. Here are the questions I’m pondering as we enter the fourth quarter.

Question 1: How will higher bond yields impact asset prices?

As you’re probably aware, bond yields are rising. September saw the US Federal Reserve raise its fund rates for the first time in three years, and more hikes could come. Inflation is running hot. The national debt hit $40 trillion, and the US Treasury is battling the bond market. In September, the 10-year Treasury yield surpassed 5%, reaching its highest level since 2007.

“If it goes above 5% and stays there, I think that has a lot of implications,” Dave Sekera, chief US market strategist for Morningstar, said before the hike.

Prices for existing bonds are coming under pressure, of course. Since the start of the year, the Morningstar US Core Bond Index is in negative territory. Rate-sensitive long-dated Treasury bonds have been hit harder. Meanwhile, syndicated bank loans have gained ground because of their floating-rate coupons.

Remember the last time the 10-year Treasury hit 5%? It was 2023. Then, as now, the Fed was hiking to combat inflation; Russia’s invasion of Ukraine had pushed up energy prices.

Recall as well that Silicon Valley Bank collapsed in 2023 thanks to rising long-term bond yields. First Republic became the second-largest bank failure in US history that same year. Granted, the 2022-23 rate hike cycle was extreme—on a scale not seen in 40 years. But the point is that rising bond yields can break things.

Sekera sees 5% as a “psychological hurdle.” Managers of pension funds, insurance companies, and other institutions engaged in “asset-liability duration matching” could shift from equities to fixed income to capture higher yields. As the risk-free rate used to value assets climbs, stocks could come under pressure. Rising rates contributed to the internet bubble bursting in 1999-2000 and sent global equities down 20% in 2022, before AI enthusiasm sparked a new bull market.

Private markets could also feel the impact. Higher borrowing costs will squeeze private market managers, for whom leverage is a key tool. Rock-bottom pandemic-era rates were behind a blockbuster 2021, when private market dealmaking set records, while rising rates were blamed for a bad 2022. Private credit is another area to watch.

Question 2: Will AI giveth or taketh away?

AI is the “defining investment theme of our era,” in the words of Morningstar’s Kenneth Lamont. Ever since the launch of ChatGPT in late 2022, AI has been the key engine of global equity markets. This year, it has powered the Morningstar Global AI Select Index to a gain of more than 60%. Corporate earnings for AI-related companies like Nvidia NVDA have been stellar. AI is also responsible for the rise of the biggest stocks in Europe and Asia.

But just as AI giveth, AI taketh away. Let’s review some of the deeper AI-driven pullbacks we’ve seen over the past two years: There was the August 2024 decline, the DeepSeek AI disruption of January 2025, AI bearishness of November 2025, the “AI Loser” trade of February 2026, and a June 2026 plunge on AI valuation fears. September brought a selloff sparked by safety fears raised by Anthropic CEO Dario Amodei.

That’s important because Anthropic is preparing to list its shares. Among the many risks pointed out by PitchBook senior research analyst Harrison Rolfes—which apply to AI stocks broadly—are insufficient processing power, memory, and energy for the company to run its models, as well as safety- and competition-related concerns. Speaking of which, OpenAI waits in the wings; its sights are set on raising funds at a private market valuation between $1.2 and $1.5 trillion.

As I’ve written before, AI has created huge concentration risk within both the US and emerging-market equities. In each universe, the top 10 stocks, which are all AI-related, take up 36%. Technology represents more than one-third of US and emerging-market stocks. In the case of the US, valuations are high.

Full disclosure: I fretted about stocks’ AI dependence after the second quarter as well. While we’ve seen volatility, stocks in aggregate have advanced in the third quarter. Each of the aforementioned pullbacks faded. The lesson is that betting against AI is risky. Timing the market is difficult.

Question 3: Will US equity market leadership continue to evolve?

AI has reshaped stock markets beyond the behemoths. In fact, Morningstar indexes representing US value stocks, micro-caps, and international equities are all ahead of the broad US stock market for 2026. The margins are slim, though.

“Value stocks, growth returns,” wrote Morningstar researcher Robbie Greengold about recent top performers coming from the value side of the US stock market. The Morningstar US Large Cap Value Index is ahead of its growth counterpart in 2026 thanks to the likes of Micron Technology MU, Intel INTC, and Applied Materials AMAT—all beneficiaries of the AI infrastructure buildout.

Meanwhile, smaller companies like SanDisk SNDK, Bloom Energy BE, and Applied Optoelectronics AAOI have all soared this year. Data centers and AI spending have been boons. The Morningstar US Micro Cap Index is outperforming.

So too is the Morningstar Global ex-US All Cap Target Market Exposure Index, which includes both developed- and emerging-market equities in Europe, Asia, and beyond. AI stocks like Taiwan Semiconductor TSM, Samsung 005930, SK Hynix SKHY, and ASML ASML are a big part of the story. But so are the financial services and energy sectors, which are especially well represented in developed markets.

Can these trends continue? For many years, investors won by betting on the US over international, growth over value, and large over small. But investment leadership is cyclical.

Question 4: What direction will commodities markets take?

In yet another parallel to 2022, natural-resources investments have thrived this year. Just look at the performance of the Morningstar Global Upstream Natural Resources Index, which includes the shares of companies whose fortunes are closely tied to the prices of energy, agriculture, precious metals, and more. It’s well ahead of the global equities universe.

This is not just about oil prices. We all know the conflict in the Middle East has pressured the energy supply this year, forcing the price per barrel above the $100 threshold at several points in 2026 and lifting profits for companies like ExxonMobil XOM, Chevron CVX, and Shell SHEL. Less reported is its effect on agricultural inputs, visible in the share prices of Corteva CTVA and Nutrien NTR. Gold prices may have come way down from their 2022 highs, but there’s a copper boom on. You see it in the stock price performance of miners BHP BHP and Rio Tinto RIO.

Obviously, a resolution to the conflict would likely bring prices down. One can speculate about the US midterm elections and their impact. I advise caution. Commodity prices are notoriously difficult to forecast.

That said, natural-resources-related investments have diversification benefits. “Despite their short-term volatility, commodities can add value at times, particularly during periods of high inflation,” wrote my colleague Amy Arnott last year. “Commodities themselves are a major part of most inflation indexes, so it makes sense that their prices tend to rise when inflation is increasing,” according to Morningstar’s 2024 Diversification Landscape report.

I’ll also note that natural-resources investments are a nice complement to an AI-heavy portfolio. As tech and tech-adjacent sectors have grown in share, energy and basic materials represent less than 6% of the US stock market. They’re a bigger chunk of international equities, though.

Diversification for the win

As I wrote earlier this summer, diversification is winning in 2026. Bonds are down this year, but not dramatically so. Global equity exposure has paid off. Investors holding US value stocks and smaller companies have been rewarded.

Entering the fourth quarter, investors face no shortage of risks. In addition to what I covered above, unknowns lurk. We must also acknowledge that current preoccupations might seem inconsequential in retrospect. Who knows what the fourth quarter of 2026 will bring. As always, a portfolio of assets that can benefit from a range of potential outcomes is a sensible response to uncertainty.