How Much Freedom Do Your Gains Buy?
Updated: Oct 21
If your portfolio grew this year, it's worth asking a question most market reviews skip: how much more freedom did that growth actually buy you?
A bigger balance sheet looks like more flexibility, and often it is. But flexibility depends on more than the total. It depends on what you own, what it would cost to sell, and whether the money is there when you need it. This quarter made that question more pressing, which is why it frames this Q3 2026 market review.
What happened in Q3
Stocks kept climbing through a difficult backdrop. The S&P 500 rose 2.0% for the quarter and 11.8% for the year through September, excluding dividends, and reached new highs. Strong earnings did most of the work: S&P 500 earnings grew 30.1% over the past 12 months, nearly four times the 7.9% historical average.
Beneath the surface, though, the gains have been narrow. In early October, with the S&P 500 within 1% of its record, the median stock sat 16% below its own high, which Goldman Sachs says is the narrowest breadth since the dot-com era.
At the same time, borrowing costs kept rising. The 10-year Treasury yield ended September at 5.29%, its highest level in about two decades and nearly double its 2.73% average since 2010. Oil moved back above $100 a barrel, inflation stayed above 3%, and in September the Fed raised its policy rate for the first time in three years, to a range of 3.75% to 4.00%.
That was hard on existing bonds. The Bloomberg U.S. Aggregate Bond Index lost 3.5% in the quarter. The other side is that high-quality bonds and cash now pay meaningful income, which makes them far more useful for specific jobs, like funding the next few years of spending, than they were when yields were near zero.
Rates remain well above the unusually low levels of the previous decade, and they may stay elevated for some time. That has consequences for companies and families alike.
Where AI fits in
Much of this year's earnings growth and market enthusiasm traces back to artificial intelligence. I believe the technology is real and its impact will be significant. But a promising technology doesn't automatically make every investment in it a good one. I find it helps to separate three questions:
Will the technology create value?
Will the companies building it profit?
Will investors who buy those companies at today's prices earn attractive returns?
Those answers don't always line up. Railroads and the internet both changed the world, and many investors still lost money by paying too much for the companies involved.
What I'm watching most closely is how the buildout is being paid for. Goldman Sachs projects that the major hyperscalers, the largest cloud computing companies, will spend about $1.2 trillion on capital expenditures in 2027, with AI a major driver. A growing share of the broader AI buildout is funded with debt. Ray Dalio, the founder of Bridgewater, recently warned that heavy borrowing combined with rising rates is what makes a boom fragile. I share that concern. When money costs more, the bar for every dollar invested gets higher.
Wealth you can use when you need it
Dalio pointed to a second risk that matters even more for families: what happens when many investors need to turn investments into cash at the same time. Selling to pay taxes or debts doesn't wait for a good price, and that kind of selling can deepen a decline.
The same thing can happen inside a household. Your wealth is real, but some of it may be hard to reach on short notice without a large tax bill or a poorly timed sale. A few common examples:
A concentrated stock position with a large built-in gain
A business that makes up most of a family's net worth
An estate that may owe estate tax, generally due nine months after death regardless of what markets are doing
A securities-backed line of credit or margin loan that may need to be paid down when prices fall
These situations can create pressure in any market. A decline tends to expose them and make them more expensive to fix.
That's why I think of liquidity and diversification as sources of freedom, not just risk controls. They let you choose when and what to sell, instead of letting a market drop or a tax deadline choose for you. None of this is a prediction that a downturn is near. It's a reason to know where you stand.
What I'm watching in Q4
Rates, oil, and AI spending will likely stay in the headlines through year end, along with the November midterms. On the election: markets have done well under many different combinations of parties in power, and earnings, growth, and interest rates have mattered far more over time. Where the outcome could matter for you is tax policy, and that's worth planning for once there's something concrete to plan around.
I’m also watching the supply of new stock. Companies have raised a record amount through IPOs and other offerings this year, and Goldman Sachs expects another $600 billion in 2027, plus roughly $1.7 trillion of shares becoming eligible for sale as IPO lockups expire. That would be the largest increase in the net supply of U.S. stock since 2000. Goldman doesn’t expect it to end the bull market, but it notes that rising rates could slow the buybacks that help absorb that supply. If you hold shares in a company that recently went public, it’s worth knowing when its lockup expires. You won’t be the only one free to sell.
Three questions before year end
Every household's answers will be different, and the right move depends on your goals, taxes, and the rest of your plan. But these are the three I'd start with:
Has a successful holding grown large enough to put your plans at risk? If so, there may be ways to reduce it gradually alongside your tax planning. Giving appreciated shares to charity or a donor-advised fund, for example, can support causes you care about without realizing the gain.
Are your upcoming cash needs covered? Know where the next few years of spending, tax payments, and large commitments would come from without a forced sale. Today's higher yields make setting money aside for those needs more rewarding than it has been in years.
Do your year-end decisions fit together? Rebalancing, harvesting losses, charitable gifts, and estate planning work best when they're made together, not in separate silos.
Sometimes a review simply confirms that your current approach still fits. That's a useful answer too.
Gains are easy to measure in dollars. I think they're better measured by the choices they give you, and by how well those choices are protected through changing markets and the obligations you can see coming.
If you'd like a second set of eyes on what this year's gains mean for what you've built, I'm always happy to talk.
This article shares Vitaly's views as of October 2026 and is for general education, not personal investment, tax, or legal advice. Investing involves risk, including possible loss of principal, and neither past performance nor forecasts guarantee future results. Advisory services are offered through Lestna Retirement, LLC, an investment adviser registered in Illinois.