U.S. stocks are entering a historically strong fourth quarter, but a sharp rise in bond yields, elevated expectations for artificial intelligence (AI) spending and political uncertainty are creating headwinds. The S&P 500 was up 12% in 2026 and less than 2% below its mid-August record high, while the Nasdaq Composite had gained more than 15%. Since 1945, the S&P 500 has averaged a 4.2% fourth-quarter increase and posted gains in 85% of those quarters, according to CFRA. Fourth quarters in midterm years have been stronger still, with an average gain of 6.4%, although midterm years overall have historically produced an average 15% decline. The index's deepest drop in 2026 has been 9%. Investors are focused on a 5.34% 10-year Treasury yield, upcoming Federal Reserve meeting minutes, third-quarter earnings from companies including PepsiCo and Delta Air Lines, and capital-expenditure plans from AI hyperscalers (large cloud and technology companies).