FROM BOB

The clouds are real. Earnings remain bright.

The worries are real. They are not the only facts investors should weigh.

Investors have plenty to think about as earnings season begins. A prolonged geopolitical conflict, higher oil prices, Treasury yields above 5%, a more hawkish Federal Reserve and the November midterm elections are all capable of producing volatility.

I do not dismiss any of those concerns. But I also do not believe they should crowd out the extraordinary strength of corporate America. Third-quarter S&P 500 earnings are currently expected to rise nearly 30% from a year ago. Revenue expectations are also strong, and analysts have been raising estimates rather than cutting them as reporting season approaches.

“The wall of worry is getting taller, but so are corporate earnings.”BOB EDWARDS

The next several weeks should help separate what is changing in the headlines from what is changing inside businesses. We will be listening for evidence about revenue growth, margins, hiring, capital spending and the return companies are earning from their investments in artificial intelligence.

The bond market deserves equal attention. Higher yields create attractive income opportunities, particularly for cash that has been sitting in bank deposits. But I do not expect long-term investors to abandon ownership of great businesses simply to lock in a fixed return. Bonds and stocks still perform different jobs.

Our approach remains optimistic and disciplined. We expect a sawtooth path rather than a straight line. We will keep comparing price with prospects, using volatility selectively and focusing on companies with strong balance sheets, durable cash flow and the ability to grow through uncertainty.

Bob Edwards

Chief Executive Officer & Chief Investment Officer

MARKET PERSPECTIVE

Earnings take center stage

The market’s next important test will come from businesses, not headlines.

FactSet estimates that S&P 500 earnings increased 29.6% from a year earlier in the third quarter. If that estimate holds, it would be the third consecutive quarter of earnings growth above 25% and the eighth consecutive quarter of double-digit growth.

The estimates have been moving higher

The expected earnings growth rate stood at 26.7% at the beginning of the quarter and reached 29.6% by October 9. That direction matters. Investors usually enter reporting season after analysts have reduced estimates; this time, the starting line has been rising.

The opportunity is broader than one headline number

All eleven S&P 500 sectors are expected to report year-over-year earnings growth, although technology, communication services and energy are doing much of the heavy lifting. The next question is whether strong results broaden across more industries and more companies.

“Corporate earnings may be stronger than investors appreciate. The next several weeks should provide a timely reminder of just how good the earnings picture is.”EAM INVESTMENT TEAM

Our outlook

As 2027 earnings estimates rise, stocks may become more attractively valued on forward earnings even if market indexes advance. If earnings and inflation develop favorably, I believe the S&P 500 could exceed our year-end target of 8,080. That is an outlook, not a promise, and we still expect meaningful swings along the way.

Source: FactSet Earnings Insight, October 9, 2026. Estimates are subject to change.

INVESTMENT THEME

From AI promises to AI economics

The buildout is real. Investors now want evidence that the spending can earn an attractive return.

This earnings season may mark a useful change in the artificial-intelligence conversation. Companies have spent heavily on chips, data centers, power, networking and software. Investors increasingly want to know what those investments are producing.

What we expect management teams to discuss

• Continued enthusiasm for data centers, semiconductors, networking, power and enterprise technology.
• Early productivity improvements in software development, customer service, logistics and decision-making.
• More pressure to connect capital spending with measurable revenue growth and margins.

What could disappoint

• Valuations that assume years of flawless execution before the earnings arrive.
• A narrow market that depends on a small number of companies to deliver nearly all the growth.
• Rising financing, energy and infrastructure costs that delay the expected payoff.

“We are moving from the era of AI promises to the era of AI economics.”EAM INVESTMENT TEAM

Our preference remains straightforward: invest in businesses that control scarce assets, possess pricing power, can fund the buildout and are beginning to show how AI spending becomes durable cash flow. Innovation can be powerful. Price still matters.

Investment themes are illustrative and are not recommendations. See source notes below.

THE ECONOMY AND THE FED

High yields may not be the final word

Inflation remains elevated, but the labor market is sending a different message.

The Federal Reserve raised its target range by one-quarter percentage point in September to 3.75%-4.00%. Since then, long-term Treasury yields have moved higher as investors weigh energy prices, inflation, fiscal concerns and the possibility of additional tightening.

The labor market is cooling

The United States added only 29,000 jobs in September, while payroll estimates for July and August were revised lower by a combined 60,000. Unemployment remained relatively low at 4.2%, and layoffs have not surged, but hiring momentum has clearly weakened.

Why that matters for inflation

A softer labor market does not guarantee lower inflation, especially while energy costs remain elevated. It does, however, reduce one source of persistent demand and wage pressure. September CPI, scheduled for October 14, will be an important test of whether underlying inflation is beginning to moderate.

“We expect bond yields to move back below 5% within the next six months as the economy and labor market cool, allowing the Fed to reconsider further tightening.”EAM INVESTMENT TEAM

That is our expectation, not a certainty. Oil, fiscal policy and inflation expectations could keep yields elevated. The practical implication is to build bond positions with attention to maturity, credit quality and cash-flow needs rather than making an all-or-nothing rate call.

Sources: Federal Reserve, U.S. Bureau of Labor Statistics and Federal Reserve Economic Data. Data through October 9, 2026.

PORTFOLIO PERSPECTIVE

Better bond yields do not make great businesses obsolete

Stocks, bonds and cash each have a different job to perform.

The rise in Treasury yields has created a genuine opportunity for investors seeking dependable income. It also raises a natural question: Why own stocks when high-quality bonds offer yields that were unavailable for much of the past decade?

Where higher yields may draw money from

We expect bonds to compete more successfully for cash sitting on the sidelines and for bank deposits that no longer offer competitive rates. That is different from assuming long-term equity investors will sell productive businesses to lock in a fixed yield.

The tax and inflation distinction

Treasury interest is generally taxable as ordinary income at the federal level, although it is exempt from state and local income tax. After taxes and inflation, the improvement in purchasing power may be considerably smaller than the stated yield. Stocks offer no guaranteed return, but successful businesses can grow earnings, dividends and value over time.

“We see bonds competing more successfully for cash on the sidelines. We do not see long-term investors abandoning stocks for bonds.”EAM INVESTMENT TEAM

RETIREMENT MUSING

Your retirement is longer than an election cycle

Prepare for the next year without sacrificing the next thirty.

Elections, Fed meetings, wars and earnings seasons matter. They affect prices, interest rates and confidence. But a retirement plan cannot be rebuilt around every development that dominates the news for a few weeks.

For many families, retirement must support spending, taxes, healthcare, travel, housing and family priorities for 25 or 30 years. That requires a plan capable of handling both near-term uncertainty and long-term inflation.

“A sound retirement plan should prepare for the next year without sacrificing the next thirty.”EAM RETIREMENT PLANNING TEAM

Separate the time horizons

• Protect near-term withdrawals so a difficult market does not determine next year’s lifestyle.
• Match dependable income and high-quality bonds to known spending needs where appropriate.
• Keep long-term capital invested for growth when the plan and risk tolerance support it.
• Review taxes before moving large balances among cash, bonds and stocks.
• Revisit the plan when your life changes, not simply because the news cycle becomes uncomfortable.

Ask the planning question first

Before reacting to markets, ask what the money is intended to do and when it will be needed. A portfolio designed around purpose is easier to manage through uncertainty than one built around a prediction.

If higher rates or recent market moves have raised questions about your retirement income, liquidity or investment allocation, your Edwards Asset Management team can help you review how the pieces fit together.

General educational information only; not tax, legal or individualized investment advice.

RECURRING FEATURE

Edwards Asset Management in the National Financial Press

Four recent stories carrying the practices market perspective to a national audience.

National financial outlets have turned to Bob Edwards for timely market commentary. Bob serves as a public voice for a much broader Edwards Asset Management team. These perspectives are informed by the daily work of our portfolio managers, financial advisors, planning professionals and client service colleagues.

CNBC COMMENTARY • OCTOBER 9, 2026 S&P 500, Nasdaq 100 and Dow End Week Higher With Traders Eyeing Earnings Season

“I believe corporate earnings remain remarkably strong.”BOB EDWARDS • CNBC COMMENTARY

BLOOMBERG • SEPTEMBER 16, 2026 Stock Market Today: Dow, S&P Live Updates

“The post-Fed stock market declines are an overreaction, and a buyable dip.”BOB EDWARDS • BLOOMBERG

FORTUNE • OCTOBER 9, 2026 Wall Street Fears a European Doom Loop as France Faces a Political Crisis

“Corporate earnings may be stronger than investors appreciate.”BOB EDWARDS • FORTUNE

NEW YORK POST • OCTOBER 9, 2026 Dow Soars as Tech Shares Rebound and Oil Prices Ease

“Yet technology stocks have demonstrated resilience, earnings expectations remain robust.”BOB EDWARDS • NEW YORK POST

View additional appearances →

LOOKING AHEAD

What we are watching next

Six questions that will matter after the day’s loudest headline has passed.

1. Earnings breadth

   Are revenue and profit gains spreading beyond the largest technology and energy companies?

2. AI economics

   Which companies can show that capital spending is becoming productivity, revenue and cash flow?

3. Inflation

   Does the September Customer Price Index (CPI) report confirm moderation beneath elevated energy prices?

4. Labor

   Does the low-hire, low-fire labor market weaken further or begin to stabilize?

5. Bond yields

   Does demand emerge around current yields, or do inflation and fiscal concerns push rates higher?

6. Election uncertainty

   How quickly do investors refocus on fundamentals after the November 3 midterms?

The monthly discipline

Headlines will change. Our process should not. We will continue to compare price with value, distinguish volatility from impairment, and align each portfolio with the real purpose of the money.

“The goal is not to predict every turn. It is to be prepared enough, and disciplined enough, to use the turns well.”EAM INVESTMENT & PLANNING TEAMS

Please reach out to your Edwards Asset Management team if you would like to review your allocation, bond maturities, cash reserves or retirement-income plan.