Q3 2026 Macro Outlook

A video conversation with Kim Arthur and James Maxwell walking through the outlook is coming soon — we will add it here when it is live. The full slide deck is available as a PDF below.

Highlights from the deck

• The quarter in reversals. Commodities lead 2026 at +24.1% but fell 11.4% in Q2; energy is +19.7% on the year after a -13.4% quarter, while info tech’s +31.8% Q2 was the strongest of any sector. The S&P 500 is +10.2% YTD.
• Oil. Whatever happens to the ceasefire, the oil market it leaves behind is structurally different: Chinese crude demand has been destroyed, not deferred; Strait of Hormuz transit remains well below the pre-war baseline; and Brent’s round trip — a peak of $114 in early May back to roughly $90 — is the market pricing all of that in. The economy is also structurally less energy-sensitive than in prior oil shocks, with food and energy down to about 11% of consumer expenditures.
• The Fed. The Fed held at 3.50–3.75% in June with the committee split for 2026 — eight members projecting no cuts, eight at least one hike. Kevin Warsh’s first meeting as chair was widely perceived as more hawkish than anticipated, and futures now price at least one hike later this year.
• Rates and income. The long end kept moving higher on renewed inflation concerns, reduced easing expectations, and an elevated term premium amid persistent deficits — a large part of why income solutions that don’t depend on duration, our BuyWrite strategy among them, have drawn growing interest.
• Labor and growth. Unemployment sits at 4.2% with payrolls averaging 92,000 over six months; lower immigration has reduced the breakeven pace of job creation. Real GDP has averaged roughly 1.4% over the past three quarters, leaving productivity as the principal upside lever.
• The capex supercycle. The AI buildout is now the largest infrastructure investment in American history — on pace to surpass $3 trillion by 2029, more than the Interstate Highway System, the U.S. railroads, and the Apollo Program combined. The investment question is shifting from who is building the infrastructure to who benefits downstream.
• Year four of the bull. This bull market began in October 2022. Since 1949, cycles extending beyond three years have seen stronger-than-average forward returns with shallower drawdowns — though midterm election years have historically been choppier through Q2 and Q3.
• International. International equities are outperforming with a roughly flat dollar, driven by European fiscal expansion, Asian capex recovery, and re-rating from discounted starting points. We are about 18 months into an outperformance cycle that has historically run for years, and earnings-driven outperformance tends to be more durable.
• Earnings and valuations. Forward twelve-month S&P 500 earnings growth has accelerated to 20.5%, with 2026 estimates at +24.5% on +10.4% revenue growth, while the forward multiple, at about 20x, remains below where it started the year — an earnings-driven setup. At eight of the nine prior turns in the forward-growth series since 2000, the index was higher a year later.
• The forecast. Consensus year-out earnings frame a twelve-month S&P 500 range of roughly 7,000 (slower growth, an 18.5x multiple) to 8,400 (consensus earnings, the current 20x multiple). Our recession dashboard remains in neutral territory, with inflation the lone negative and PMI and retail sales improving.