TREVORHong Kong · October 2026
Three months on, here's the next one. Same rules as always: this isn't a market report (you can get those anywhere, and most are forgotten within the month), it's the update I'd want if I were on the other side of the table. What actually happened, what it means for a real plan, and what I'd quietly suggest you do about it. Which, most quarters, is less than you'd think.
First, at Home
Atlas's vocabulary has really taken off this quarter. His proudest achievement is counting from one to ten, and he knows it; a close second is showing anyone who'll listen exactly what sound a monkey makes. He's also turning into a small gymnast, doing barrel rolls across the floor and hanging off things he really shouldn't be hanging off, with a strength that surprises me every time.
I'll admit I'm now slightly fearing the terrible twos. I've also been told, by people who survived them, that they come with their own joys, and that the hard parts and the good parts tend to arrive together. That turned out to be a decent summary of the quarter in markets too.
The Quarter in Review
The quarter in five numbers
- 42%Rise in oil (Brent crude)
- 5.29%US 10-year yield, highest since 2002
- 1stUS rate rise since 2023
- +7.6%Hong Kong, after a weak half
- −4.7%Japan, after a strong half
In July I wrote about the framework agreement that had reopened the Strait of Hormuz and brought oil back near US$70. It didn't hold the way markets hoped. As the summer went on, hopes of a lasting reopening faded, and Brent crude climbed from around US$73 a barrel to roughly US$104 by the end of September, a rise of about 42%.
Expensive oil finds its way into everything, and inflation followed it: euro-area prices rose 3.8% in the year to September, the fastest pace since 2023. So central banks that had spent the first half talking about patience spent September raising rates instead. The European Central Bank moved on the 10th. The US Federal Reserve followed on the 16th with its first rise since 2023, and because the Hong Kong dollar is pegged to the US dollar, the HKMA lifted its base rate the very next day. The Bank of England held at 3.75%, though three of its nine members wanted to go higher.
Bonds took the hit. When rates rise, the price of existing bonds falls, and the US 10-year yield went from 4.44% to 5.29% over the quarter, its highest since 2002; UK gilts touched levels last seen in 2007. Shares, meanwhile, barely seemed to notice. The S&P 500 finished the quarter about 2% higher.
“The hard parts and the good parts usually arrive together. In markets, as at home.”
Markets in the Third Quarter
Under that quiet headline, two markets swapped places. Hong Kong, the laggard of the first half, rose about 7.6% over the quarter, even after giving back nearly 4% in September. It's still around 4% down on the year, but the gap has narrowed a long way. Japan went the other way: the Nikkei fell almost 5% in the quarter, though it remains more than 30% up since January. Elsewhere the Nasdaq added about 2.5% and the FTSE 100 about 1%. Gold rose a little and still sits roughly a quarter below its January record, while bitcoin jumped about 43%, which still leaves it slightly lower than where the year began.
Who won the quarter?
Asia gave us both ends of the table. Singapore and Hong Kong led the way, while South Korea, one of the year’s best performers until the summer, fell 19% as its memory-chip makers sold off. Same continent, same three months, opposite outcomes; that’s the case for owning a spread rather than a story.
Energy companies rose almost 16% on the back of oil, and healthcare held up well. The sectors that tend to behave a little like bonds, utilities and property, had a hard time as yields climbed, and industrials struggled too. US technology, for all the headlines, finished only modestly higher.
| Market | Q3 | Index, 30 Jun → 30 Sep |
|---|---|---|
| Singapore | +9.8% | Straits Times, 5,170.65 → 5,675.88 |
| Hong Kong | +7.6% | Hang Seng, 22,881.00 → 24,613.27 |
| US | +2.0% | S&P 500, 7,499.36 → 7,651.54 |
| UK | +1.0% | FTSE 100, 10,497.10 → 10,606.00 |
| Germany | +0.8% | DAX, 24,995.80 → 25,199.19 |
| Australia | +0.1% | S&P/ASX 200, 8,778.70 → 8,789.30 |
| Japan | −4.7% | Nikkei 225, 70,062.32 → 66,753.72 |
| India | −5.2% | Nifty 50, 23,865.75 → 22,620.45 |
| South Korea | −19.3% | KOSPI, 8,476.48 → 6,838.04 |
| Sector | Q3 | Official sector name |
|---|---|---|
| Energy | +15.8% | Energy |
| Healthcare | +6.2% | Health Care |
| Media & telecoms | +3.6% | Communication Services |
| Technology | +2.7% | Information Technology |
| Banks & finance | −0.4% | Financials |
| Everyday staples | −3.0% | Consumer Staples |
| Materials | −4.2% | Materials |
| Property | −7.1% | Real Estate |
| Retail & leisure | −7.2% | Consumer Discretionary |
| Industrials | −9.8% | Industrials |
| Utilities | −13.0% | Utilities |
I'd love to tell you I saw the Hong Kong and Japan turns coming. I didn't, and I'm wary of anyone who says they did. What I can say is that someone who owned both markets didn't need to guess; one rose, one fell, and the portfolio got on with it. If you want the case for diversification in a single quarter, that was it.
Nine months in, the S&P 500 is up nearly 12% for the year and the Nasdaq nearly 16%, before dividends. Whatever the number on your own statement says, it's nine months of a plan measured in decades.
How to Behave From Here
The honest answer to "what should I do about rising rates?" is, for most people, very little that the plan didn't already allow for. But "very little" deserves some detail:
Know what your mortgage is tied to. If you borrow in Hong Kong, the Fed's decisions reach you through HIBOR or your bank's prime rate. It's worth knowing which one your loan follows, so that another rise, if it comes, lands as an expected bill rather than a surprise.
Don't judge your bonds by one bad quarter. A lower bond price comes with a higher yield, which means money added from here earns more than it has for years. If you're near retirement, your bonds are there to cover the next few years of spending without forcing you to sell shares at a bad moment. That job hasn't changed.
Leave the season's winners alone. Bitcoin had a 43% quarter and oil a 42% one. Neither is a plan, and buying something because of its last three months is a reliable way to own the top.
Keep the contributions going. Higher yields and a choppier September just mean your regular money buys at different prices this month. That's the point of regular money.
The Tailwinds, and How to Use Them
Not everything this quarter was a headwind. A few things are quietly working in a long-term investor's favour:
Income is back, properly. US bonds now yield about 5.6%, or roughly 3.1% after inflation, according to J.P. Morgan's latest Guide to the Markets, against a long-run average nearer 2.5%. For cautious money, that's the best deal in years; for anyone holding far more cash than their plan needs, it's a good moment to ask why.
Profits are doing the work. US company earnings for 2026 are tracking around 31% growth, faster than share prices have risen. Rallies built on earnings tend to age better than rallies built on stories, although they don't move in a straight line either.
It isn't just America any more. On J.P. Morgan's figures, Japan, emerging markets and the rest of Asia are all up more than 20% this year, ahead of the S&P 500, while the ten largest US companies now make up about 36% of that index. A portfolio built to capture broader markets carries less single-story risk. I'll keep making that point until it stops being true.
To Close
If this update raised a question (about your mortgage, your bonds, or whether the plan still matches the life), don't sit with it until January. That's precisely what review meetings are for, and mine tend to be shorter and calmer than people expect.
If we work together already, book your review whenever you're ready, and bring the awkward questions especially. If we don't yet, the Financial Discovery Session is a full hour, complimentary, and carries no obligation at all.
Thank you, as always, for reading. And if you have any advice for surviving the terrible twos, I'm all ears.
Trevor Lee
Planning for Better Tomorrows, Together
Past performance is not a reliable indicator of future results, and the value of investments can fall as well as rise. Market figures are approximate price returns as at 30 September 2026, from FRED (Federal Reserve Bank of St. Louis), J.P. Morgan's Guide to the Markets and central bank releases. This letter is general commentary, not personalised advice; nothing in it should be acted on without a review of your own circumstances.