Monthly Investment Letter- September 2026

Each month we review current research from First Trust, J.P. Morgan Asset Management, Franklin Templeton, MFS, and PGIM and share the points that matter most for your portfolios. Last month the main takeaway was resilience: company profits were strong, the economy was holding up, and most researchers expected the Federal Reserve to leave interest rates unchanged through year-end. August changed part of that picture. This letter updates you on what is new and what has not changed.

The Fed Sent a Firmer Message

The Federal Reserve sets short-term interest rates, which influence borrowing costs, bond prices, and, over time, stock valuations. In August, that policy outlook became less settled.

On August 28, Fed Chair Kevin Warsh gave his first speech at the Jackson Hole symposium. He said recent inflation readings look a bit better, but they have not convinced him the underlying trend has improved enough. The Fed’s preferred inflation measure remains near 3.3%, still above the 2% goal. He also noted that credit markets do not appear tightly restrained. His standard was clear: if inflation is not moving toward 2% with enough confidence and speed, the Fed has “work to do.”

Markets took that as a more hawkish signal. MFS’s Week in Review reported that the odds of a rate increase at the September meeting moved toward a coin flip. The 10-year Treasury yield, a benchmark that helps set many other rates, finished August near 4.70%.

Company Profits Remain the Market’s Main Support

Stocks have been supported less by hope than by earnings. MFS noted that U.S. corporate profits reached a record $4.83 trillion annual pace in the second quarter, equal to about 18% of national income. Franklin Templeton remains constructive and cites expected earnings growth still above 20% for U.S. and global companies. Late in August, strong results from Nvidia and several software firms helped stocks firm again.

Leadership did not stay in one place. In July and early August, technology stocks—the group that has led much of this year’s advance—went through another pullback. Other areas of the market participated more. Tech later recovered. That pattern fits J.P. Morgan’s factor research: value and quality stocks look inexpensive by historical standards, while the most crowded recent winners carry more risk of a setback.

Bonds, Buybacks, and Geopolitics

Two other items stood out in August. The U.S. Treasury said it plans to at least double its purchases of long-term bonds. That news created some unease because it can affect prices at the long end of the bond market. Even so, Franklin Templeton and PGIM still see useful income in high-quality bonds, provided duration—the sensitivity of bond prices to rate moves—is managed with care. PGIM also argued that inflation has been more volatile because of supply shocks, which makes a thoughtful approach to fixed income more important.

Geopolitical headlines did not fade. MFS’s late-August recap included additional U.S. sanctions tied to Iran, talks around a temporary shipping corridor through the Strait of Hormuz, and a sharper trade dispute with Canada. Developments like these can move oil prices and investor sentiment quickly.

What Has Not Changed

The longer-term story is still intact. Companies continue to spend heavily on artificial intelligence—chips, networking, power, and data-center infrastructure. First Trust’s third-quarter equity work remains moderately positive and expects that spending to help more than just the largest technology names, including industrials and banks that lend to businesses. PGIM still describes the backdrop as one of strong tailwinds and thicker risks: AI investment and government spending support growth, while energy and geopolitical shocks remain live concerns.

How the Research Teams Line Up

•        Stocks: still constructive, but more selective. Franklin Templeton retains a positive view of equities, with an emphasis on the United States, Japan, and emerging markets. First Trust continues to look for earnings to broaden beyond mega-cap technology. MFS strategist Rob Almeida notes that heavy index concentration can last for years, but history shows competition eventually resets the scoreboard.

•        Interest rates: less certain than a month ago. A September rate hike is no longer a remote idea. The next inflation and employment reports, along with the Fed meeting, will matter more than they did in early August.

•        Bonds: income is available if we are selective. Elevated yields still offer a reason to own high-quality fixed income. Short-to-intermediate bonds, municipals, and carefully chosen credit remain the more practical places to collect that income.

•        Near-term risks: the September Fed decision, the next jobs and inflation data, whether AI-related companies keep meeting higher expectations, and any flare-up in energy or trade tensions.

Our Approach

My overall view has not flipped, but the path of interest rates now deserves more attention. I remain constructive on stocks over a multi-year horizon because earnings, not just rising valuations, have been doing much of the work. I also do not want portfolios to depend on a small group of AI leaders.

We continue to emphasize quality companies, a balance of growth and value, exposure beyond the largest names, and high-quality bonds for income and stability. September is often a choppy month for stocks. A live Fed meeting and unresolved geopolitical issues make short-term swings more likely. The research still points to resilience and opportunity, provided we stay diversified and patient.

Please reach out anytime if you would like to discuss how this update applies to your plan.