September 2026 Market Commentary

September 14, 2026

• Fed holds annual Jackson Hole Economic Symposium.
• S&P 500 earnings increase 52% from a year ago.
• US national debt surpasses $40T.
• August Returns: S&P 500 2.6%. Bloomberg US Aggregate Bond index 0.4%.

The dog days of summer. The term conjures images of hot, oppressive days that sap one’s energy, creating a sense of lethargy. In many respects, equity markets experienced their own version of dog days in August, as markets drifted in search of direction before ultimately moving higher, following the path of least resistance. Somewhat counterintuitively, it was the bond markets that drew the most attention during the month, as longer-term yields remained stubbornly high, prompting action by the U.S. Treasury. In Jackson Hole, new Fed Chair Kevin Warsh presented his keynote speech, providing further thoughts on inflation and the Fed’s role in controlling it.

Second-quarter earnings season effectively concluded in August, with consolidated S&P 500 earnings increasing 52% from a year ago. Overall, 86% of companies beat their earnings estimates, while 77% beat their revenue estimates. According to industry group FactSet, the Magnificent 7 (“Mag 7”)—Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla—once again drove growth, recording consolidated earnings growth of 119%. However, both the Mag 7 and overall S&P 500 benefited from outsized earnings reports from Alphabet and Amazon, boosted by non-operational equity investments. Excluding those two companies, Mag 7 earnings growth was 43%, while total S&P 500 earnings growth was 34%.

The strong earnings growth helped buoy markets from periodic bouts of volatility as investors continued to swing from enthusiasm for all things AI to concerns about potential returns on the massive investments being made to develop AI infrastructure. Given its dominant position in AI chips, Nvidia’s earnings reports carry outsized importance as a barometer for the broader AI Investment and insurance products and services are not a deposit, are not FDIC- insured, are not insured by any federal government agency, are not guaranteed by the bank and may go down in value. Information and research contained herein do not represent a recommendation of investment advice to buy or sell stocks or any financial instrument nor is it intended as an endorsement of any security or investment, and it does not constitute an offer or solicitation to buy or sell any securities. It is not possible to invest directly in an index. There is no assurance that investment products based on the index will accurately track index performance or provide positive investment returns. Past performance is not a guarantee of future results. These materials have been prepared solely for informational purposes based upon information generally available to the public from sources believed to be reliable. The views and opinions expressed in this publication are subject to change, at any time, without advance notice or warning. industry. Nvidia reported fiscal second quarter 2027 results that beat both revenue and earnings expectations. In addition, they provided an upbeat forecast for calendar year 2027 that exceeded analysts’ expectations. The report provided some renewed momentum for the AI trade.

For the month, large caps (S&P 500) gained 2.6%. Small caps (Russell 2000) returned a more modest 0.9%. International market returns were stronger, with developed markets (MSCI EAFE) up 1.8% and emerging markets (MSCI EM) up 3.2%.

August served as a vivid reminder that bond markets are not always as staid as people often believe. The Treasury market experienced meaningful volatility across the curve, with the 2-year yield ranging 20 basis points between 4.14% and 4.35% as traders continuously repriced rate-hike expectations throughout the month. The long end of the curve told an even more interesting story as the 30-year yield traded between 5.17% and 5.31%. Since July 7, the 30-year yield has continuously remained above 5%, the longest such stretch since 2007. The 10-year briefly touched 4.75% on August 31st, its highest level since January 2025, driven by rising oil prices, inflation concerns, and mounting rate hike speculation.

Two stories defined the bond market narrative for the month. In mid-August Treasury Secretary Bessent announced the US Treasury would expand its buybacks of 30-Year Treasuries in an effort to relieve upward pressure on yields. Given the inverse relationship between bond prices and yields, the idea was that by putting upward pressure on prices by doubling the amount of bonds the Treasury purchased, it would put downward pressure on yields. The idea generated significant headlines and was quickly dubbed the “Bessent put.” The initial reaction offered some relief, but the reprieve was short-lived as the market largely shrugged off the intervention and yields resumed their climb, underscoring the limits of supply management in the face of structural inflation concerns.

The second and more consequential development came at month-end, when Fed Chair Kevin Warsh delivered his first major address at Jackson Hole. Since assuming the Chair in May, Warsh has provided no forward guidance and has removed it from Fed communications, introducing increased uncertainty resulting in higher rates. Investors had also begun to question Warsh’s willingness to tamp down on inflation via Fed rate hikes. In his speech, Warsh touched on both forward guidance and inflation. On the former, he said it can play an important role during times of crisis but currently the practice has “overstayed its welcome.” Warsh also reiterated his belief that too much Fed guidance can distort market signals that the Fed and market participants rely upon for decision making. Regarding inflation, Warsh warned that inflation has “not meaningfully slowed” and that the summer’s readings do not tell him that “underlying trends have meaningfully improved.” He also reaffirmed the Fed’s 2% PCE target as “firm and fixed.” His speech sent 2-year yields up 12 basis points on the day and increased market expectation for a September rate hike from 35% to 57%.

Corporate bonds added another layer of complexity to the broader bond market, with AI-driven issuance flooding the primary market and testing investor appetite for technology-linked supply. Alphabet led the charge during the week of August 3 with a $25 billion, multi-tranche offering—one of the largest investment-grade deals of the year. The increased corporate issuance comes as the Treasury continues to issue near-record amounts of debt to fund the deficit, which stood at $1.97 trillion at month-end, pushing total government debt past $40 trillion. The increased supply has placed pressure on prices, resulting in higher rates.

The municipal market participated fully in August’s turbulence. Issuance reached $62.6 billion for the month—a heavy supply calendar by any measure—with several weeks exceeding $15 billion in new deals. Municipals underperformed Treasuries, with the ratio reaching 71% on the 10-year. High-yield municipal deals struggled, with multiple transactions pulled from the market as a steeper curve and tighter financing conditions made execution difficult for lower-rated borrowers.

Inflation remained elevated in August, pressured by higher energy prices resulting from renewed fighting between the U.S. and Iran. On a headline basis, the Consumer Price Index (CPI) rose 0.4% in August, its largest monthly gain since May. A 3.9% increase in gasoline prices accounted for one-third of the overall monthly increase. Compared with a year ago, headline CPI increased 3.4%, the same pace recorded in July. Core CPI, excluding food and energy prices, rose 0.3% for the month and 2.4% from a year ago. In early September, diesel prices surpassed $6 per gallon for the first time, propelled by a confluence of factors, including fighting in the Middle East and Ukrainian attacks on Russian energy infrastructure. Given the importance of diesel to the transportation industry, record-high prices will continue to put upward pressure on prices throughout the broader economy, including groceries.

Nonfarm payrolls added 162,000 jobs in August, more than three times economists’ forecast of 53,000. Underlying details were also strong, with household survey data showing that 569,000 individuals found work while 683,000 entered the labor force, helping the participation rate rebound to 61.6% after falling to a nearly five-and-a-half-year low of 61.4% in July. The prior two months were revised upward by a combined 55,000, helping July swing from a net loss of 23,000 to a net gain of 21,000. Perhaps the one criticism of the report was that it was driven largely by restaurant hiring and education, which some economists described as “one-off” factors suggesting a lack of broader strength. Food services and drinking places added 59,000 jobs, far above the category’s average gain of 12,000 over the prior 12 months. Local government education, which had shown little net change since January 2025, added 42,000 jobs. Average hourly earnings increased 3.1% year over year, the slowest pace since May 2021.

The combined strength of the August employment and inflation reports has convinced markets of the near certainty of a September rate hike. As of this writing, markets are pricing in an 87% chance of a 0.25% increase at the Fed’s upcoming meeting. Curiously, a rate hike may have the effect of lowering longer-term rates, which are currently being driven in part by concerns about longer-term inflation and whether Fed Chair Warsh is willing to raise rates to combat it. Doing so might help assuage concerns about the Fed’s willingness to drive inflation lower through rate hikes, thereby reducing some upward pressure on longer-term rates.

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