Q3 2026 Market Recap: Energy Up, Utilities Crushed, and Software Flipped | The Weekly Wrap

Economic stress is intensifying as mortgage rates hit 7.5% and distressed leveraged loans reach post-pandemic highs, with the technology sector holding the largest concentration of these risks. The S&P 500 has effectively become a single-theme trade centered on artificial intelligence, with over 65% of the index—including utilities, industrials, and financials—linked to AI-driven capital expenditure. Third-quarter performance reflected this volatility, as energy stocks surged due to geopolitical tensions while utilities and industrials faced corrections. Traditional diversification strategies are increasingly ineffective because AI dominance now permeates both equity markets and corporate debt issuance. Investors seeking safety from these fluctuations should prioritize short-term treasuries. Recent portfolio adjustments include closing a short position in FICO and exiting a long position in Glass House Brands following concerns regarding management stability.