Global Market Insights – September 2026

Standout earnings growth* has remained a key support for equities, with performance lagging company fundamentals and resulting in valuations becoming progressively cheaper as the quarter progressed. Unusually, bonds attracted more attention than equities, with a surge in volatility as government bonds sold off. Oil prices were partially responsible, with Brent Crude oil prices surging above $100 per barrel, as an escalation in the Middle East conflict resulted in Saudi Arabia closing a major oil pipeline. This move higher in global bond yields was most visible in the US and Japan 10-year government bond yields surpassing 5% and 3%, respectively. Yields had not reached this level in Japan for three decades. Whilst US Treasury Secretary Scott Bessent's intervention has been somewhat effective in thwarting the yen weakness, the US debt buyback has not prevented Treasury yields from continuing to climb, with 30-year mortgages now in excess of 7% for the first time in more than two years. Beyond inflation concerns, the bond yield move is also a function of continued US economic strength, ballooning government debt and 'hyperscaler' bond issuance to fund the vast amount of artificial intelligence (AI) capital expenditure. The market is now pricing three to four interest rate hikes over the next 18 months, including one in October, which looks excessive given the Federal Reserve (Fed) will likely want to remain politically neutral on the eve of the midterms.

The macro picture is broadly strong, with the global industrial recovery still intact, as evidenced by most major economies seeing Purchasing Managers' Indices (PMIs) sitting firmly in expansionary territory, with September 2026 US data pointing to its strongest expansion since July 2021. Meanwhile, economic growth is mirroring the resilience seen in earnings growth. The Atlanta Fed Gross Domestic Product (GDP) tracker now expects US economic growth of 5.1% for Q3 2026, and Indian GDP growth hit 7.8% in the latest quarter. Entering this year, central banks largely leaned towards reducing interest rates, even where inflation was above the targeted 2%. However, economic strength, albeit with renewed inflation concerns, has enabled a more hawkish shift as demonstrated by the Fed, European Central Bank (ECB) and Bank of Japan's decision to raise interest rates. The Fed's hawkish tone resulted in dollar strength and a sharp sell-off in gold over the month, which we would expect to unwind in the coming months as interest rate hiking expectations are reined in.

As we head into the final quarter of the year, politics will once again crowd the news flow as the Republican Party continues to face pressure from an electorate pushing for change. It seems that Republicans have a very slim chance of maintaining power in both the Senate and House, whilst Brazil also faces an important election which may see President Lula unseated.