Andrew Hill Investment Advisors has released its third-quarter 2026 investor letter, reviewing a market pulled in competing directions. Rising oil prices, higher interest rates, and persistent inflation weighed on stocks and bonds, while resilient corporate earnings and continued investment in artificial intelligence supported the broader equity market.
The letter does not report an aggregate third-quarter return for client portfolios. For context, the S&P 500 gained 3.54% through September 22, while the Bloomberg U.S. Aggregate Bond Index declined 2.8%. Oil prices climbed sharply, and the Federal Reserve raised its benchmark rate to 3.75%–4.00%, which the letter describes as its first increase in more than three years.
Exposure to software, AI hardware, and selected strategic investments supported client account performance, although losses elsewhere and rising bond yields offset some gains. The letter highlights a pronounced divide between investment themes: an equal-weight basket of AI stocks returned an average of 13.0% during the quarter, compared with an 8.3% decline for a basket of traditional-economy stocks.
Looking ahead, the firm expects the AI investment cycle to continue but remains cautious about the broader stock market. Its concerns include higher rates, inflation, geopolitical tensions, constrained consumer spending, election uncertainty, and a potential slowdown in AI capital spending as additional computing capacity becomes available. Against that backdrop, Andrew Hill favors companies with solid earnings, higher cash balances, and a gradual increase in fixed-income exposure, noting that high-grade corporate bonds offer yields above 6%.
Microsoft Corporation (NASDAQ:MSFT) is a global technology company providing business software, cloud computing, artificial intelligence tools, operating systems, and gaming products. Its businesses include Microsoft 365, Azure, Windows, enterprise applications, and Xbox, serving individual consumers, companies, and government organizations. On October 29, 2026, its shares closed at $530.14, a decrease of 0.16% from the previous session, giving the company a market capitalization of approximately $3.94 trillion.
Here’s what Andrew Hill Investment Advisors has to say about Microsoft Corporation (NASDAQ:MSFT):
“Microsoft delivered a strong rebound during the quarter as investor sentiment toward software companies improved and the market increasingly recognized the durability of the company’s growth profile. The company remains exceptionally well positioned at the intersection of cloud computing and artificial intelligence, with continued demand for Azure and growing adoption of AI-powered tools across its software ecosystem. Microsoft’s recurring revenue model, strong balance sheet, and disciplined capital allocation continue to provide a solid foundation for long-term growth. In our view, Microsoft remains one of the highest-quality businesses in the world and a compelling way to participate in both the software recovery and the ongoing expansion of artificial intelligence.”
On October 28, 2026, Microsoft Corporation (NASDAQ: MSFT) reported fiscal first-quarter 2027 revenue of $92.3 billion, an increase of 19% year over year, while operating income rose 21% to $45.9 billion. Microsoft Cloud revenue increased 30% to $63.9 billion, and Azure revenue climbed 48%. Reported diluted earnings reached $4.92 per share, up 32%, while the company returned $10.2 billion to shareholders through dividends and share repurchases.
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Disclosure: No material interests to disclose. This article was originally published on Global Market Bulletin.
