Mid-Month Update
Headlines & Highlights
- Fed hikes interest rates: The Federal Reserve raised short-term interest rates by a quarter of a percentage point to 3.75%-4.0% at its September meeting today. The move, approved in a 12-0 vote, was a response to worrisome inflation – the core Consumer Price Index (CPI) reading for August, which excludes food and energy, was notably higher than a month earlier. This suggests inflationary pressures may be spreading beyond oil prices. A non-binding poll of Fed officials indicated that the central bank may raise rates one more time before year-end.
- $100+ oil as Iran conflict escalates: Intensified fighting in the Middle East pushed up the price of oil by 20% in the first half of September. Brent crude, the global oil benchmark, topped $108 per barrel on September 15, up from about $90 at the end of August and its highest level since mid-May. The latest hostilities between the U.S. and Iran have included attacks on oil tankers on both sides of the Strait of Hormuz and strikes on oil infrastructure. Houthi fighters in Yemen helped their Iranian allies by shutting down tanker traffic out of the Red Sea.
- Yields, war weigh on stocks: Concerns about rising bond yields and the prospects of a prolonged Iran War cast a pall over the global stock market in the first half of September, but year-to-date performance remains strong. Through September 15, the iShares ETF for the S&P 500 large-cap index was down 1.2% so far this month (+11.7% year to date), while the more rate-sensitive ETF for the Russell 2000 small-cap index stood at -2.8% (+16.5% YTD). International developed and emerging markets were at -2.0% (+11.4%) and -1.9% (+21.0%), respectively.
Chart of Interest
Key Takeaways
- Fed chair Kevin Warsh has staked his reputation on bringing inflation down to the central bank’s 2% target – the September interest-rate hike can be viewed as a way to establish credibility with the market given his appointment by President Trump, who has been unabashed in saying that he wants rates to be much lower than they now are.
- Annualized inflation has been above 2% every month since March 2021 – the cumulative increase in CPI over that period is close to 30%. The University of Michigan’s consumer sentiment gauge plunged in September to its second-lowest reading in more than seven decades – the sharp upswing in gasoline prices is a major contributor.
- The Iran War has lasted longer than we and many others anticipated at the outset, and this longevity has helped sustain high inflation. The early thinking was that the war would be over before November’s midterm elections, but given the apparent lack of momentum toward peace, it is likely that voting will end before the fighting does.
- Accelerating earnings growth expectations that powered stocks forward in the first half of 2026 continue to be a potent force in the third quarter. The latest weekly estimate from financial data firm FactSet forecasts that S&P 500 earnings for 3Q will be roughly 29% higher than in the same period last year. If accurate, it would be a third straight quarter of 25%+ earnings growth.
- September is historically the roughest month of the year for U.S. stocks. In fact, it is the only month over the long term in which performance is negative – going back to 1928, S&P 500 shares have posted an average September return of -1.1%. War and inflation could make this historical pattern even more likely this September. October is typically much better (+0.9%).
The material shown is for informational purposes only. Past performance is not indicative of future performance, and all investments are subject to the risk of loss. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties and actual results may differ materially from those anticipated in forward-looking statements. As a practical matter, no entity is able to accurately and consistently predict future market activities. Information herein incorporates Altair Advisers’ opinions as of the date of this publication, is subject to change without notice, and should not be considered as a solicitation to buy or sell any security. While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented. Material contained in this publication should not be construed as accounting, legal, or tax advice. See Altair Advisers’ Form ADV Part 2A and Form CRS at https://altairadvisers.com/disclosures/for additional information about Altair Advisers’ business practices and conflicts identified. All registered investment advisers are subject to the same fiduciary duty as Altair Advisers.
The material shown is for informational purposes only. Past performance is not indicative of future performance, and all investments are subject to the risk of loss. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties and actual results may differ materially from those anticipated in forward-looking statements. As a practical matter, no entity is able to accurately and consistently predict future market activities. Information herein incorporates Altair Advisers’ opinions as of the date of this publication, is subject to change without notice, and should not be considered as a solicitation to buy or sell any security. While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented. Material contained in this publication should not be construed as accounting, legal, or tax advice. See Altair Advisers’ Form ADV Part 2A and Form CRS at https://altairadvisers.com/disclosures/ for additional information about Altair Advisers’ business practices and conflicts identified. All registered investment advisers are subject to the same fiduciary duty as Altair Advisers.