Monthly Market Commentary

Market Commentary: September 2026

By Abbey Henderson, CFP®, RLP®, CAP®, AEP®

Glance at the S&P 500’s September and you’d guess it was a quiet month. The index slipped less than half a percent. The month included a widening war, oil above $100 a barrel and the Federal Reserve’s first rate increase in three years. Against that backdrop, a half-percent dip is practically a nap.

It wasn’t a nap. The Dow fell more than 4%. Smaller companies dropped more than 5%, while the tech-heavy Nasdaq still managed a gain. The 10-year Treasury yield reached levels last seen in 2007. Consumer confidence sank to its lowest point since 2014, in the same week the government raised its estimate of spring growth.

The common thread is that much of September’s stress came from strength. Solid demand kept inflation sticky. Sticky inflation pushed interest rates up. Higher rates then sorted companies into the ones that can shrug off borrowing costs and the ones that can’t. Meanwhile, the people living inside that strong economy told surveyors they’ve rarely felt worse about it. I want to spend this letter on that gap, because I think it’s the most useful thing September has to teach us.

Oil: A Shipping Lane in Your Grocery Bill

The war involving Iran entered its seventh month in September, and the fighting crept closer to the routes that carry the world’s oil. Early in the month, U.S. forces struck three Iranian oil tankers after Iranian missile launches at American ships. Iran then announced plans for a restricted zone outside the Strait of Hormuz, a narrow passage that carried roughly a fifth of the world’s oil before the war. In Yemen, Houthi forces kept up the campaign against Saudi tankers they began in July. By mid-month, Brent crude, the international benchmark, was trading above $100 a barrel. Here at home, the national average price of diesel set an all-time record.

Why does diesel matter so much? Almost everything in your kitchen spent part of its life on a truck, a train or a ship. When diesel jumps, the trucking company pays first, then the grocery chain. Eventually some of that cost lands on the shelf. Energy is an ingredient in almost everything, which is how a standoff over a strait half a world away ends up on your receipt.

Late in the month there was some relief. Saudi Arabia restarted a pipeline that lets it ship oil from its Red Sea coast and skip Hormuz entirely, and exports from the region began to recover. Talks continued through mediators without a deal. As I write this in early October, oil has jumped again on reports that Washington is weighing new military options. I wouldn’t call any of this settled.

Inflation: Steady on Top, Stubborn Underneath

Over the twelve months through August, consumer prices rose 3.4%, matching July’s pace. On the surface, that looks flat. The month itself ran hotter. Prices rose 0.4% from July to August, with gasoline up almost 4% in a single month.

Economists also watch something called core inflation. It leaves out food and energy, because those prices bounce around so much, and tracks slower-moving costs like rent, insurance and services. Core prices were up 2.4% over the year, a small improvement from 2.5% in July. The monthly core number came in a bit hotter than forecasters expected, though. The Fed noticed that detail, and so did I.

Why would one hot month matter if the yearly number held still? A spike in gas prices hurts, but it can reverse. The bigger worry is that it spreads. Businesses raise prices because shipping got more expensive. Workers push for raises to keep up. Before long, a temporary bump turns into a habit. Expectations play a role, too. In the University of Michigan’s September survey, the inflation people expect over the next year jumped to 4.6% from 4.0% in August. A separate New York Fed survey put the same measure at 3.9%, its highest reading since May 2023.

One encouraging note arrived on the last day of the month. The Fed’s preferred inflation gauge for August came in a little cooler than economists expected. September’s consumer price report arrives October 14, and I’ll be reading it closely.

The Fed: The First Raise in Three Years

On September 16, the Fed lifted its benchmark rate by a quarter point, to a target range of 3.75% to 4.00%. That was its first increase since 2023, and the vote was 12 to 0. In the Fed’s telling, the economy is growing at a solid clip and inflation is still too high.

How does raising rates fight inflation? It makes borrowing more expensive, so a family puts off the car loan and a business delays the new warehouse. Less borrowing means less spending. Less spending gives prices room to cool. It’s a blunt tool that works slowly, which is why central banks try to act before an energy shock becomes a habit.

The minutes of that meeting, released October 7, filled in the picture. Every participant backed the increase, and most expected one more before year-end. Some worried that the AI building boom could push demand ahead of what the economy can supply, a classic recipe for higher prices. The reassuring part: officials judged that longer-term inflation expectations still lined up with their 2% goal.

The Fed had company. The European Central Bank raised rates on September 10. Japan’s central bank followed two days later, taking its rate to a level last seen in 1995. In London, the Bank of England stood pat, though three of its nine policymakers voted for an increase. At the start of this year, markets expected the Fed to cut rates. By the end of September, traders were debating how many more increases might come.

Bonds: The Long End Has a Mind of Its Own

Bonds had a rough month. The yield on the 10-year Treasury rose about half a percentage point in September and ended the month near 5.3%, a level it hadn’t reached since 2007. Government bond yields hit multi-year highs in Japan, Germany and the United Kingdom as well.

Bond prices and yields sit on opposite ends of a seesaw, and I’ve seen that trip up plenty of smart people. Picture owning a bond that pays 4% just as new ones start paying 5%. Nobody will pay full price for yours. Its price falls until its return matches the new going rate.

The Fed sets short-term rates. Long-term rates like the 10-year are set by investors buying and selling, so they can move on their own. The BlackRock Investment Institute, BlackRock’s research group, offered a useful explanation in its October 5 commentary. In its view, Fed expectations move long-term rates in the short run. The bigger driver is what it calls intensifying competition for capital. Governments around the world are borrowing heavily, and the companies racing to build artificial intelligence are borrowing too. When more borrowers chase the same pool of savings, lenders can ask for more.

On October 7, the 10-year briefly topped 5.35% during trading, its highest level since 2002. For you, the effects cut both ways. Higher long-term rates push up the cost of a mortgage or a car loan. They also mean cash and newly issued bonds pay more income than they have in years.

U.S. Markets: A Calm Average, a Bumpy Ride

Price returns. *Russell 2000 September return calculated from AP-reported closing levels; all other figures as published. See Data Sources.

The S&P 500’s small dip hides how unevenly September treated companies. The Nasdaq, heavy with large technology firms, gained almost 2%. The Dow, made up of 30 established companies, lost more than 4%. The Russell 2000, which tracks smaller companies, gave back a big chunk of a terrific year.

Why would higher rates hurt some companies so much more than others? Jeremy Siegel, the Wharton finance professor best known for Stocks for the Long Run, pointed to profit margins in his October 5 commentary for WisdomTree. In his view, a company that keeps 40 or 50 cents of operating profit from each dollar of sales, before interest and taxes, can absorb an extra point of borrowing cost far more easily than one keeping 8 or 10 cents. Margins aren’t the whole story. How much a company borrows, and on what terms, matters just as much. Smaller businesses tend to carry more debt relative to their size, and more of it floats with interest rates, so higher rates reach them faster.

On September 14, chip stocks sold off after several prominent AI executives suggested the industry should slow development of its most advanced models. The selling faded within days, and the Nasdaq set a record on September 22. The S&P 500 followed with a record close of its own on October 6. Even then, only about one in four stocks in the index was trading above its average price of the previous ten weeks. A few giants were doing most of the lifting.

Earnings: Why Stocks Haven’t Flinched

With rates this high, why are stocks anywhere near records? Mostly, profits.

When you own a share, you own a slice of what the company will earn in the years ahead. Higher rates make those future earnings worth a little less today. A dollar you’ll receive in five years looks less appealing when a Treasury pays 5% right now. If earnings grow fast enough, though, they can more than make up the difference.

They’re growing fast. As of October 2, analysts expected S&P 500 companies to report third-quarter earnings about 29.5% higher than a year ago, according to FactSet. On June 30, the estimate had been 26.7%. Only a handful of companies had reported by then, so the figure is almost entirely forecasts. Analysts usually trim estimates as a quarter goes along. This time they raised them, for the second quarter running.

I’d hold two caveats next to that number. Energy companies are expected to lead the growth, which makes sense with oil where it is. It also means part of this profit boom rests on the same prices squeezing everyone else. And last quarter, large one-time investment gains at a couple of the biggest tech companies made overall earnings look stronger than the underlying businesses were. I’ll be watching for that again when the big banks kick off the season the week of October 12.

The Economy: Stronger on Paper Than It Feels

The government’s final look at the spring delivered a real upgrade. Growth from April through June was revised to a 2.2% annual pace, up from 1.5%. A measure called real final sales to private domestic purchasers combines consumer spending with business and housing investment. It leaves out inventories, government spending and trade, which can swing the headline number around. That measure grew at a 4.6% annual rate in the second quarter. Put simply, the private economy was humming.

You’d never know it from asking people. In September, The Conference Board’s confidence index dropped to 81.9, a reading it hadn’t seen since April 2014. The University of Michigan’s sentiment survey sat near the bottom of its history, too. People pointed to higher prices, energy and mortgage costs, and growing worry about finding work.

How can both be true? I think of it this way. Growth figures measure what the whole economy produces and spends. Confidence surveys measure how individual people feel. Nothing shapes that feeling faster than the prices you pay every week. When the tank, the cart and the loan payment all cost more at once, a household can be spending more and enjoying it less. The totals also blur a split. Some families are doing very well, while others are genuinely stretched.

Jobs: Why a Weak Report Sent Stocks Higher

The September jobs report came out on October 2, and it was soft. Employers added just 29,000 jobs, well below the roughly 84,000 economists expected. The unemployment rate rose to 4.2% from 4.1%. Earlier months were revised down as well, and July now shows a small loss.

So why did stocks rise that morning? Because of what the report meant for the Fed. Before it came out, traders had been leaning toward another rate increase at the Fed’s October 27 and 28 meeting. Afterward, those odds dropped sharply. A cooler job market means less pressure on wages and prices, which gives the Fed room to wait. In September, good economic news pushed rates up. In early October, mildly bad news brought relief. Investing has some odd logic these days.

I’d keep this report in perspective. Part of the rise in unemployment came from more people starting to look for work, which is a healthier reason than layoffs. One soft month after a strong spring doesn’t make a trend. It’s still worth watching, and it shows how quickly a single report can flip the mood.

Bringing It Together

September asked us to hold two pictures at once. In the first picture, the economy grew faster than anyone thought and companies kept raising their profit forecasts. The stock market sat at a record a week into October. In the second picture, families felt worse about their finances than at any point in more than a decade. Diesel hit records, and borrowing costs climbed to levels many people haven’t seen since before the financial crisis.

Both pictures are accurate. The trouble starts when one of them quietly makes your decisions for you.

At Abaris we talk a lot about Authentic Wealth. It’s our way of describing a life where your money, mindset, time, relationships and health line up with what you value. September was a Mindset month. Much of what people felt came from the checkout line and the gas pump. That frustration is real, and it’s also separate from what’s happening inside a long-term plan. A thoughtful long-term plan should already account for stretches of higher prices, higher rates and uncomfortable markets. No plan can make you feel calm about them.

So I have one request for October. The next time a headline tightens your stomach, ask which picture it belongs to: the one about your weekly costs, or the one about your long-term plan. If it’s the first, that may be worth a fresh look at your budget. If it’s the second, give us a call before you act on it.

Data Sources

Index returns are price returns. September returns for the S&P 500, Dow Jones Industrial Average and Nasdaq Composite are as published in Investrade’s Market Review of September 30, 2026, and the S&P 500 and Dow figures match 24/7 Wall St. (October 1, 2026). Year-to-date returns are as published by the Associated Press in its September 30, 2026 market close report. No published price-return figure for the Russell 2000’s September performance was available, so that one figure was calculated from the AP-reported closing levels of August 31 and September 30, 2026; CNBC (September 30) reported the index fell more than 5% for the month.

Economic figures come from the U.S. Bureau of Labor Statistics (Consumer Price Index for August 2026, released September 11, and the Employment Situation for September 2026, released October 2), the U.S. Bureau of Economic Analysis (third estimate of second-quarter 2026 GDP, released September 30), The Conference Board (Consumer Confidence Index, September 29), the University of Michigan Surveys of Consumers and the Federal Reserve Bank of New York’s Survey of Consumer Expectations for September 2026. Policy details come from the Federal Reserve’s FOMC statement of September 16, 2026, and the minutes of that meeting released October 7, 2026, along with decisions by the European Central Bank (September 10), Bank of Japan (September 18) and Bank of England. Earnings estimates are from FactSet Earnings Insight, October 2, 2026.

Diesel prices are from the U.S. Energy Information Administration weekly retail survey. Market and news context draws on reporting from the Associated Press, Reuters, Bloomberg, CNBC, Yahoo Finance, NBC News, OilPrice.com and Nuveen’s fixed income commentary.

Outside perspectives: Jeremy J. Siegel, “Softer Jobs Data Gives Fed Room to Pause,” WisdomTree weekly commentary, October 5, 2026 (republished by Advisor Perspectives, October 7); BlackRock Investment Institute, weekly market commentary, “U.S. dollar: surprisingly resilient,” October 5, 2026.