By John Lau, CPA, CFP®
Why Recent Performance Shouldn’t Determine What You Own
October 2026
As we begin the final quarter of 2026, I find myself looking back at September and thinking about two very different stories being told by the financial markets.
The stock market has remained remarkably resilient. Despite higher interest rates, geopolitical uncertainty, persistent inflation concerns and plenty of reasons for investors to become nervous, stocks held up relatively well during September and completed another positive quarter. Corporate earnings have been a major reason for that resilience, along with continued enthusiasm surrounding artificial intelligence and the substantial investment being made in the infrastructure needed to support it.
The bond market, however, has been telling a less comfortable story.
September was a difficult month for bonds. Treasury yields moved sharply higher, with the 10-year U.S. Treasury yield climbing above 5% during the month. Because bond prices and interest rates generally move in opposite directions, many investors saw the market value of their bond holdings decline.
For clients who own bonds, I understand why this can be frustrating. Bonds are often thought of as the quieter part of a portfolio. When their values decline while stocks continue to perform well, a perfectly reasonable question follows:
Why am I holding these bonds at all?
That question is worth answering.
What Is the Bond Market Worried About?
There isn’t one simple explanation for the rise in interest rates.
Inflation remains part of the story. While inflation has declined substantially from the levels we experienced several years ago, it remains above the Federal Reserve’s long-term objective. Energy prices and geopolitical developments add another layer of uncertainty because higher energy costs can eventually work their way into transportation, manufacturing and household expenses.
The economy has also remained surprisingly resilient. Consumer spending has held up, corporate profits have generally been strong, and enormous investment associated with artificial intelligence, data centers and related infrastructure continues to provide an important source of economic activity. A stronger economy is generally good news, but it can also give the Federal Reserve less reason to move quickly toward lower interest rates.
And then there is an issue I believe investors will increasingly need to pay attention to: government borrowing.
Large fiscal deficits mean the U.S. Treasury must continually issue substantial amounts of debt. The United States is not alone; governments around the world are confronting growing borrowing needs. At some point, investors may demand higher yields to commit their money for ten, twenty or thirty years.
None of this means that a bond-market crisis is imminent. It does mean that the investment environment has changed, and we should understand what that change means for our portfolios.
The Investment Landscape Has Changed
For many years, investors faced a fairly straightforward problem: interest rates were so low that anyone seeking a reasonable long-term return was almost forced to take more equity risk.
That is no longer true.
When high-quality fixed-income investments offer yields around 5%, investors once again have choices. Stocks remain an essential part of a long-term growth strategy, but the hurdle they must clear has become higher. An investor accepting the uncertainty and volatility of equities should reasonably expect to be compensated for taking that additional risk.
This is one reason I continue to emphasize diversification. We still want growth, and equities remain our primary source of long-term growth. But today’s interest-rate environment gives us more alternatives than we had when high-quality bonds paid very little.
That brings us to a question I’ve been hearing more frequently.
If My Bonds Are Down, Why Not Buy More Stocks?
I understand the logic.
If interest rates have risen, bond values have declined and stocks have continued to appreciate, why not reduce the bond allocation and put more of that money into equities?
For someone who depends upon a portfolio for retirement income, bonds can provide an important source of funds that may reduce the need to sell stocks during a major market decline. But many investors—including some of our clients—don’t need their portfolios to provide current income at all.
For them, the question becomes even more interesting:
If I don’t need the income from bonds, and stocks are likely to produce higher returns over long periods of time, why own bonds at all?
That’s a fair question.
The answer begins with recognizing that generating income is only one reason to own bonds. For an investor who doesn’t need portfolio income, the more important role of fixed income may be risk management and diversification.
Stocks and bonds perform different jobs. Equities are generally the primary long-term growth engine of a portfolio. Bonds ordinarily have lower expected long-term returns, but they can reduce the amount of risk we need to take with the overall portfolio. They can also provide capital that can be rebalanced into stocks when equity markets experience significant declines.
Think about what happens during a major stock-market correction. If equities fall 25% or 30% while higher-quality bonds hold up considerably better, a diversified investor has something valuable: an asset that can potentially be sold or rebalanced into equities when stock prices are substantially lower.
That optionality has value even for someone who never needs to withdraw a dollar from the portfolio.
There is also an important behavioral consideration. It is easy during a strong stock market to conclude that we would be perfectly comfortable owning substantially more equities. The real test comes when the market is down 30%, financial headlines are frightening, and there is no obvious reason to believe the decline is over.
A portfolio should be designed around the amount of risk an investor can live with through an entire market cycle, not simply the amount of risk that feels comfortable when stocks are doing well.
But Not Everyone Needs the Same Amount of Bonds
This is an important distinction.
I don’t believe every investor needs the same bond allocation. Someone with substantial financial resources, no need for portfolio withdrawals, a long investment horizon and both the willingness and financial capacity to tolerate significant equity-market declines may reasonably hold a higher allocation to equities than someone who depends upon the portfolio to fund retirement expenses.
That is an asset-allocation decision worth reviewing.
But it is different from selling bonds because bonds have recently disappointed us.
In fact, we should be particularly careful about making that decision after bond prices have declined while stocks have performed well. We could find ourselves selling the asset that has already fallen in order to buy more of the asset that has already risen.
There is also an irony in today’s bond market. The same rise in interest rates that caused existing bond prices to fall has also increased their prospective returns. A bond purchased when yields were 2% is very different economically from a comparable bond available when yields are around 5%. Higher yields don’t eliminate interest-rate risk, but they provide a much larger return cushion than investors had when rates were near historic lows.
So when we review a bond allocation today, I don’t think the right question is simply:
“Are my bonds making money?”
I think there are three better questions:
What job are these bonds supposed to perform in my portfolio?
Do I still need them to perform that job?
And given today’s yields, valuations and my own financial circumstances, is the amount of risk in my overall portfolio still appropriate?
For some investors, the answer may be that the bond allocation should change. For others, the existing allocation may still make considerable sense.
The important thing is that we make that decision based on the investor’s goals, time horizon, financial capacity and overall strategy—not because one asset class has recently disappointed us while another has performed well.
We don’t own different investments because we expect all of them to win at the same time. We own them because we don’t know in advance which one will be needed next.
What Should We Expect Between Now and Year-End?
I would be very cautious about making a specific market prediction for the final three months of the year. There are simply too many variables that can move markets in either direction.
Corporate earnings remain an important source of support for equities. At the same time, investors will continue to ask whether the extraordinary investment and profit growth associated with artificial intelligence can continue at the same pace.
Interest rates will remain another major variable. The Federal Reserve must balance inflation that remains above its desired level against the possibility that higher borrowing costs eventually begin to slow the economy. Energy prices and geopolitical developments add another complication.
Valuations still matter as well. Strong corporate earnings help justify higher stock prices, but U.S. equities—particularly large growth companies—are not inexpensive. Higher Treasury yields also provide genuine competition for investment dollars.
Put all of that together, and I would not be surprised to see more volatility between now and December 31.
But volatility by itself is not a reason to change a long-term financial strategy.
The Decisions We Can Actually Control
This brings me back to a theme I discussed last month.
We spend an enormous amount of time talking about things we cannot control. We debate what the Federal Reserve will do, where interest rates are headed, whether artificial intelligence stocks are overvalued, what oil prices will do, and where the S&P 500 will finish the year.
Those are interesting questions, and we certainly pay attention to them. But none of us controls the answers.
Meanwhile, there are important financial decisions that are within our control, and the window for making some of those decisions is getting shorter.
With three months remaining in 2026, this is the time to review Roth conversions, Required Minimum Distributions, Qualified Charitable Distributions, capital gains and losses, charitable contributions, tax withholding and estimated payments, beneficiary designations, and any changes in family circumstances that may affect an estate plan.
For some families, year-end planning may involve deciding whether additional income should intentionally be recognized this year. For others, it may mean realizing losses, accelerating charitable gifts, completing an RMD, or simply confirming that everything has already been addressed.
There isn’t one year-end checklist that is right for everyone. The important thing is to look at these decisions together, rather than one at a time.
Looking Beneath the Surface
I keep returning to this subject because I continue to see how easy it is for investment performance to dominate the financial conversation.
When markets are rising, we focus on how much we made. When markets fall, we worry about how much we lost. When one investment outperforms another, we wonder why we didn’t own more of it.
But while everyone is looking at performance, no one may be looking beneath the surface to see how everything is connected.
That is where blind spots live, and that is where many financial problems begin.
A Roth conversion doesn’t exist independently of Medicare premiums. An investment decision doesn’t exist independently of taxes. An IRA distribution doesn’t exist independently of a retirement-income strategy. And an estate plan doesn’t exist independently of beneficiary designations and the way assets are actually titled.
This is why I believe financial coordination becomes increasingly important as wealth and financial lives become more complex.
As We Head Into the Final Quarter
September gave us a useful reminder that different investments can tell us different things at the same time. Stocks can remain resilient while bonds decline. Corporate earnings can be strong while interest rates rise. Inflation can improve in one report while another development creates a new concern.
Financial markets are rarely simple.
And this is precisely why I don’t think we should make major allocation decisions by looking in the rearview mirror.
Today’s winner can become tomorrow’s laggard. An asset that looks unnecessary today may become extraordinarily valuable under a different set of market conditions. We cannot know the sequence in advance.
Fortunately, successful financial planning doesn’t require us to know.
We can make sure portfolios are properly diversified. We can determine how much risk we actually need to take. We can plan taxes. We can coordinate retirement distributions. We can review estate and beneficiary decisions. And we can make sure the different parts of a financial life are working together.
Those are things we can control.
As we enter the final three months of the year, I would encourage you not only to ask:
“How are my investments doing?”
but also:
“Is my overall financial strategy doing what I need it to do?”
Those are two very different questions.
As always, if something has changed in your life, if you have questions about the role of bonds or other investments in your portfolio, or if there is an area of your financial strategy that you would like us to review before year-end, please reach out. There is still time to make thoughtful decisions before December 31.
Our clients rely on us for timely information, and our job is to deliver.
Retirement Income Architecture™
Coordinating the decisions that shape your financial life.
When the Winners and Losers Change
By John Lau, CPA, CFP®
Why Recent Performance Shouldn’t Determine What You Own
October 2026
As we begin the final quarter of 2026, I find myself looking back at September and thinking about two very different stories being told by the financial markets.
The stock market has remained remarkably resilient. Despite higher interest rates, geopolitical uncertainty, persistent inflation concerns and plenty of reasons for investors to become nervous, stocks held up relatively well during September and completed another positive quarter. Corporate earnings have been a major reason for that resilience, along with continued enthusiasm surrounding artificial intelligence and the substantial investment being made in the infrastructure needed to support it.
The bond market, however, has been telling a less comfortable story.
September was a difficult month for bonds. Treasury yields moved sharply higher, with the 10-year U.S. Treasury yield climbing above 5% during the month. Because bond prices and interest rates generally move in opposite directions, many investors saw the market value of their bond holdings decline.
For clients who own bonds, I understand why this can be frustrating. Bonds are often thought of as the quieter part of a portfolio. When their values decline while stocks continue to perform well, a perfectly reasonable question follows:
Why am I holding these bonds at all?
That question is worth answering.
What Is the Bond Market Worried About?
There isn’t one simple explanation for the rise in interest rates.
Inflation remains part of the story. While inflation has declined substantially from the levels we experienced several years ago, it remains above the Federal Reserve’s long-term objective. Energy prices and geopolitical developments add another layer of uncertainty because higher energy costs can eventually work their way into transportation, manufacturing and household expenses.
The economy has also remained surprisingly resilient. Consumer spending has held up, corporate profits have generally been strong, and enormous investment associated with artificial intelligence, data centers and related infrastructure continues to provide an important source of economic activity. A stronger economy is generally good news, but it can also give the Federal Reserve less reason to move quickly toward lower interest rates.
And then there is an issue I believe investors will increasingly need to pay attention to: government borrowing.
Large fiscal deficits mean the U.S. Treasury must continually issue substantial amounts of debt. The United States is not alone; governments around the world are confronting growing borrowing needs. At some point, investors may demand higher yields to commit their money for ten, twenty or thirty years.
None of this means that a bond-market crisis is imminent. It does mean that the investment environment has changed, and we should understand what that change means for our portfolios.
The Investment Landscape Has Changed
For many years, investors faced a fairly straightforward problem: interest rates were so low that anyone seeking a reasonable long-term return was almost forced to take more equity risk.
That is no longer true.
When high-quality fixed-income investments offer yields around 5%, investors once again have choices. Stocks remain an essential part of a long-term growth strategy, but the hurdle they must clear has become higher. An investor accepting the uncertainty and volatility of equities should reasonably expect to be compensated for taking that additional risk.
This is one reason I continue to emphasize diversification. We still want growth, and equities remain our primary source of long-term growth. But today’s interest-rate environment gives us more alternatives than we had when high-quality bonds paid very little.
That brings us to a question I’ve been hearing more frequently.
If My Bonds Are Down, Why Not Buy More Stocks?
I understand the logic.
If interest rates have risen, bond values have declined and stocks have continued to appreciate, why not reduce the bond allocation and put more of that money into equities?
For someone who depends upon a portfolio for retirement income, bonds can provide an important source of funds that may reduce the need to sell stocks during a major market decline. But many investors—including some of our clients—don’t need their portfolios to provide current income at all.
For them, the question becomes even more interesting:
If I don’t need the income from bonds, and stocks are likely to produce higher returns over long periods of time, why own bonds at all?
That’s a fair question.
The answer begins with recognizing that generating income is only one reason to own bonds. For an investor who doesn’t need portfolio income, the more important role of fixed income may be risk management and diversification.
Stocks and bonds perform different jobs. Equities are generally the primary long-term growth engine of a portfolio. Bonds ordinarily have lower expected long-term returns, but they can reduce the amount of risk we need to take with the overall portfolio. They can also provide capital that can be rebalanced into stocks when equity markets experience significant declines.
Think about what happens during a major stock-market correction. If equities fall 25% or 30% while higher-quality bonds hold up considerably better, a diversified investor has something valuable: an asset that can potentially be sold or rebalanced into equities when stock prices are substantially lower.
That optionality has value even for someone who never needs to withdraw a dollar from the portfolio.
There is also an important behavioral consideration. It is easy during a strong stock market to conclude that we would be perfectly comfortable owning substantially more equities. The real test comes when the market is down 30%, financial headlines are frightening, and there is no obvious reason to believe the decline is over.
A portfolio should be designed around the amount of risk an investor can live with through an entire market cycle, not simply the amount of risk that feels comfortable when stocks are doing well.
But Not Everyone Needs the Same Amount of Bonds
This is an important distinction.
I don’t believe every investor needs the same bond allocation. Someone with substantial financial resources, no need for portfolio withdrawals, a long investment horizon and both the willingness and financial capacity to tolerate significant equity-market declines may reasonably hold a higher allocation to equities than someone who depends upon the portfolio to fund retirement expenses.
That is an asset-allocation decision worth reviewing.
But it is different from selling bonds because bonds have recently disappointed us.
In fact, we should be particularly careful about making that decision after bond prices have declined while stocks have performed well. We could find ourselves selling the asset that has already fallen in order to buy more of the asset that has already risen.
There is also an irony in today’s bond market. The same rise in interest rates that caused existing bond prices to fall has also increased their prospective returns. A bond purchased when yields were 2% is very different economically from a comparable bond available when yields are around 5%. Higher yields don’t eliminate interest-rate risk, but they provide a much larger return cushion than investors had when rates were near historic lows.
So when we review a bond allocation today, I don’t think the right question is simply:
“Are my bonds making money?”
I think there are three better questions:
What job are these bonds supposed to perform in my portfolio?
Do I still need them to perform that job?
And given today’s yields, valuations and my own financial circumstances, is the amount of risk in my overall portfolio still appropriate?
For some investors, the answer may be that the bond allocation should change. For others, the existing allocation may still make considerable sense.
The important thing is that we make that decision based on the investor’s goals, time horizon, financial capacity and overall strategy—not because one asset class has recently disappointed us while another has performed well.
We don’t own different investments because we expect all of them to win at the same time. We own them because we don’t know in advance which one will be needed next.
What Should We Expect Between Now and Year-End?
I would be very cautious about making a specific market prediction for the final three months of the year. There are simply too many variables that can move markets in either direction.
Corporate earnings remain an important source of support for equities. At the same time, investors will continue to ask whether the extraordinary investment and profit growth associated with artificial intelligence can continue at the same pace.
Interest rates will remain another major variable. The Federal Reserve must balance inflation that remains above its desired level against the possibility that higher borrowing costs eventually begin to slow the economy. Energy prices and geopolitical developments add another complication.
Valuations still matter as well. Strong corporate earnings help justify higher stock prices, but U.S. equities—particularly large growth companies—are not inexpensive. Higher Treasury yields also provide genuine competition for investment dollars.
Put all of that together, and I would not be surprised to see more volatility between now and December 31.
But volatility by itself is not a reason to change a long-term financial strategy.
The Decisions We Can Actually Control
This brings me back to a theme I discussed last month.
We spend an enormous amount of time talking about things we cannot control. We debate what the Federal Reserve will do, where interest rates are headed, whether artificial intelligence stocks are overvalued, what oil prices will do, and where the S&P 500 will finish the year.
Those are interesting questions, and we certainly pay attention to them. But none of us controls the answers.
Meanwhile, there are important financial decisions that are within our control, and the window for making some of those decisions is getting shorter.
With three months remaining in 2026, this is the time to review Roth conversions, Required Minimum Distributions, Qualified Charitable Distributions, capital gains and losses, charitable contributions, tax withholding and estimated payments, beneficiary designations, and any changes in family circumstances that may affect an estate plan.
For some families, year-end planning may involve deciding whether additional income should intentionally be recognized this year. For others, it may mean realizing losses, accelerating charitable gifts, completing an RMD, or simply confirming that everything has already been addressed.
There isn’t one year-end checklist that is right for everyone. The important thing is to look at these decisions together, rather than one at a time.
Looking Beneath the Surface
I keep returning to this subject because I continue to see how easy it is for investment performance to dominate the financial conversation.
When markets are rising, we focus on how much we made. When markets fall, we worry about how much we lost. When one investment outperforms another, we wonder why we didn’t own more of it.
But while everyone is looking at performance, no one may be looking beneath the surface to see how everything is connected.
That is where blind spots live, and that is where many financial problems begin.
A Roth conversion doesn’t exist independently of Medicare premiums. An investment decision doesn’t exist independently of taxes. An IRA distribution doesn’t exist independently of a retirement-income strategy. And an estate plan doesn’t exist independently of beneficiary designations and the way assets are actually titled.
This is why I believe financial coordination becomes increasingly important as wealth and financial lives become more complex.
As We Head Into the Final Quarter
September gave us a useful reminder that different investments can tell us different things at the same time. Stocks can remain resilient while bonds decline. Corporate earnings can be strong while interest rates rise. Inflation can improve in one report while another development creates a new concern.
Financial markets are rarely simple.
And this is precisely why I don’t think we should make major allocation decisions by looking in the rearview mirror.
Today’s winner can become tomorrow’s laggard. An asset that looks unnecessary today may become extraordinarily valuable under a different set of market conditions. We cannot know the sequence in advance.
Fortunately, successful financial planning doesn’t require us to know.
We can make sure portfolios are properly diversified. We can determine how much risk we actually need to take. We can plan taxes. We can coordinate retirement distributions. We can review estate and beneficiary decisions. And we can make sure the different parts of a financial life are working together.
Those are things we can control.
As we enter the final three months of the year, I would encourage you not only to ask:
“How are my investments doing?”
but also:
“Is my overall financial strategy doing what I need it to do?”
Those are two very different questions.
As always, if something has changed in your life, if you have questions about the role of bonds or other investments in your portfolio, or if there is an area of your financial strategy that you would like us to review before year-end, please reach out. There is still time to make thoughtful decisions before December 31.
Our clients rely on us for timely information, and our job is to deliver.
Retirement Income Architecture™
Coordinating the decisions that shape your financial life.
Disclosure and Source
Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens Wealth Management, LLC”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any investment decisions. The information contained herein was compiled from sources believed to be reliable, but Robertson Stephens Wealth Management, LLC does not guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens Wealth Management, LLC assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens Wealth Management, LLC. Performance may be compared to several indices. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. A complete list of Robertson Stephens Wealth Management, LLC Investment Office recommendations over the previous 12 months is available upon request. Past performance does not guarantee future results. Forward-looking performance objectives, targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are speculative and involve substantial risks including significant loss of principal, high illiquidity, long time horizons, uneven growth rates, high fees, onerous tax consequences, limited transparency and limited regulation. Alternative investments are not suitable for all investors and are only available to qualified investors. Please refer to the private placement memorandum for a complete listing and description of terms and risks. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens Wealth Management, LLC only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens Wealth Management, LLC’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens Wealth Management, LLC’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2026 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens Wealth Management, LLC is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere. A3884
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