The US economy grew at a 3.4% annual rate in the third quarter of 2026, and consumer prices were 3.7% higher in September than a year earlier. Put those two readings side by side and you have fundamental analysis explained in miniature, because together they help explain why the Federal Reserve raised rates in September and why two of its officials wanted another rise in October. This guide maps how growth, inflation and rates push on each other and how that run of data reached currencies, bonds, stocks and gold. The worked example pulls a 10-year bond yield apart to show what markets expect inflation to do over the next decade.
Quick answer: Fundamental analysis at the macro level studies the economic forces behind prices. Growth drives company earnings and demand for raw materials. Inflation shapes what central banks do next. Interest rates set the cost of money, which affects what investors will pay for every asset. Markets tend to react to how each new reading compares with what was expected.
Watch Rate Expectations Move Currencies
Major currency pairs are often the first markets to react when growth, inflation or rate expectations shift, and you can trade them as CFDs on SelfMSF.
Fundamental Analysis Explained Through Three Forces
Growth
Growth is the change in how much an economy produces, measured by gross domestic product. The US reading for the third quarter of 2026 was 3.4% at an annual rate, up on 2.2% in the second quarter. Investment, consumer spending and government spending all rose, and within investment the gains came mainly from inventories and equipment, led by computers. Hiring was much weaker. Employers added just 29,000 jobs in September, and unemployment has sat between 4.1% and 4.3% since March.
Inflation
Inflation is the rate at which prices rise. US consumer prices were 3.7% higher in September than a year earlier, with energy up 20.4% and gasoline up 34.2%. Core inflation, which leaves out food and energy, was 2.6%. The Fed aims for 2% inflation measured by the PCE price index, a close relative of CPI.
Interest Rates
The Fed raised its target range by a quarter point to 3.75% to 4% in September, then held it on October 28. That statement said activity was expanding at a strong pace and inflation remained high, and two of the twelve voters, Lisa Cook and Beth Hammack, preferred a quarter-point hike. Longer-term rates are set by bond markets, and the 10-year Treasury yield stood at 5.05% on the day of the decision, according to the Treasury’s daily yield curve.
| US macro reading | Latest figure | Released |
|---|---|---|
| Fed funds target range | 3.75% to 4.00% (held) | October 28 |
| Real GDP growth, Q3 2026 (annual rate) | 3.4% | October 29 |
| CPI inflation, 12 months to September | 3.7% | October 14 |
| Core CPI inflation | 2.6% | October 14 |
| Nonfarm payrolls, September | +29,000 | October 2 |
| 10-year Treasury yield (daily curve rate) | 5.05% | October 28 |
Figures from the Federal Reserve, BEA, BLS and the US Treasury.
How the Three Forces Feed Each Other
The forces run in a loop. Strong growth lifts demand, and demand can push prices up. Rising inflation leads central banks to raise rates. Higher rates make borrowing dearer, which cools spending and, with a lag, growth and inflation too.
Markets try to price each turn of that loop before it happens. By November 2, traders were putting the chance of a December Fed hike at around 75%, according to Trading Economics. A rate rise that’s fully expected can pass with little reaction, while a surprise in either direction can move several markets within minutes.
The Four Macro Regimes
Analysts often sort conditions by the direction of growth and inflation. The patterns are tendencies drawn from past cycles, and any of them can break.
| Growth | Inflation | What often happens |
|---|---|---|
| Rising | Falling | Shares tend to do well, and central banks have room to hold or cut |
| Rising | Rising | Rate expectations climb, yields rise and commodity prices often firm |
| Falling | Rising | The hardest mix for central banks, and both shares and bonds can come under pressure |
| Falling | Falling | Rate cuts become more likely, and bond prices often rise as yields fall |
The US in late 2026 looked closest to the second row, with an energy shock pushing headline inflation well above core.
Worked Example: Splitting a Bond Yield Into Its Parts
A 10-year Treasury yield bundles two things together, the real return investors want and the inflation they expect. The US Treasury also sells inflation-protected bonds (TIPS), whose yield shows the real part on its own. Subtract one from the other and you get the market’s inflation forecast.
- Nominal 10-year yield on October 28, 2026: 5.05%
- 10-year TIPS real yield the same day: 2.67%
- Breakeven inflation: 5.05% minus 2.67% gives 2.38%, roughly the average yearly inflation the bond market expects over the next decade
- Compare with today’s inflation: CPI is running at 3.7%, and the lower breakeven figure suggests bond investors expect inflation to ease over time while staying above the Fed’s 2% goal
- Check the policy rate: the midpoint of the Fed’s range is 3.875%, which leaves a real policy rate of about 0.2% against headline CPI and about 1.3% against core
Measured against headline inflation, the Fed’s rate is barely above zero in real terms, which gives some context for the two October votes to raise it.
Real yields carry through to other markets. Gold pays no interest, and a real yield near 2.7% makes holding it more costly in lost income. With real yields at that level and markets pricing further Fed hikes, gold slid under $3,900 on October 30, its lowest level of 2026. Our explainer on gold and bonds follows that relationship in detail.
Using Fundamental Analysis Across Each Market
- Forex: currencies tend to follow the gap between interest rates in two economies, and a surprise in US inflation or jobs data often moves the dollar against every major pair
- Stocks: growth lifts expected earnings, while higher yields reduce what investors will pay for earnings far in the future. The S&P 500 closed at 7,676.77 on October 26, up 12.1% for the year, even with 10-year Treasury yields near 5%. Our guide to reading company results covers the earnings side
- Commodities: oil is an input to inflation as well as a market, and the EIA assumes Middle East oil flows stay constrained through the fourth quarter in its October outlook. Our oil article shows how crude reaches inflation and currencies
- Metals: gold often moves against real yields and the dollar, and industrial metals tend to follow growth
- Crypto: Bitcoin and other coins have become sensitive to rate expectations and the dollar, and their prices remain highly volatile
The SelfMSF Fundamental Analysis Guide has the basics of fundamental analysis explained through a single jobs report, and it pairs well with this map.
Key Takeaways
- Growth, inflation and interest rates are the three macro forces behind most big moves across markets.
- The forces run in a loop, and markets try to price each turn before the data confirms it.
- A nominal bond yield splits into a real yield and expected inflation, and the TIPS market shows both.
- Real yields reach gold, stocks and currencies, which is why one inflation report can move all of them.
- Market reactions depend on the gap between a reading and what was expected.
Frequently Asked Questions
What is fundamental analysis in simple terms?
Fundamental analysis is the study of what gives a market its value. For a company, that means revenue, earnings and outlook. For a currency or an index, it means growth, inflation and interest rates. Traders use it to understand why prices move, and they judge each new piece of data against what markets expected.
How do interest rates affect the stock market?
Higher interest rates can weigh on stocks in two ways. They raise borrowing costs for companies, and they make future earnings worth less today, because bonds pay more. Lower rates tend to do the opposite. Strong earnings growth can still push shares higher while rates rise, as US stocks showed in 2026.
How does inflation affect currencies?
Inflation affects a currency mainly through interest rates. Higher inflation often leads a central bank to raise rates, and higher rates can attract money into that currency. If inflation rises and the central bank doesn’t respond, the currency can weaken as its buying power falls. Markets react most to the gap between forecast and actual inflation.
What is a real interest rate?
A real interest rate is the nominal rate minus inflation. It shows what money earns after rising prices are taken into account. On October 28, 2026, the 10-year Treasury yielded 5.05% and inflation-protected bonds yielded 2.67%, a real rate that gold and growth stocks are both sensitive to.