Equity Market Commentary - September 2026

The Fed's recent 25 basis point rate hike, contrary to historical trends, failed to spook the market, which rallied instead. This relief rally stemmed from the S&P 500's prior sideways trading, suggesting it had already priced in a less dovish Fed. Furthermore, depressed sentiment indicators and data supporting accelerating economic growth provided a bullish backdrop.

However, the equity environment has fundamentally shifted from accommodative to restrictive policy. The key question remains the extent of future tightening, which is highly uncertain and will likely hinge on upcoming CPI readings. This macro uncertainty will continue to pressure stocks until at least 2027.

Despite macro headwinds, Q4 could see a pivot back to micro-fundamentals, historically a strong period for markets. The author remains optimistic, citing rising earnings estimates and the potential for corporate capex to drive growth, supported by companies like United Rentals. International markets in Europe and Japan are also showing promise due to positive earnings revisions.