MONTHLY MARKET UPDATE
September 2026
Author: Jesmar Halliday, CFA
EQUITY MARKETS had a difficult month with rising bond yields and higher energy prices weighing on investor confidence. The unresolved US–Iran conflict and concerns over Middle Eastern supply pushed Brent crude above US$100 a barrel, adding to inflation pressures. The Federal Reserve’s 0.25 percentage point interest rate increase on 16 September reinforced concerns that borrowing costs would remain elevated, although resilient economic activity and corporate earnings provided some support.
US performance revealed a clear divide between the largest technology companies and the broader market. The S&P 500 slipped by 0.35%, while the Nasdaq Composite gained 1.93% and the Bloomberg Magnificent 7 Total Return Index advanced by 4.22%. In contrast, the Dow Jones Industrial Average fell by 4.12%, the S&P MidCap 400 declined by 4.22% and the Russell 2000 lost 5.25%. Continued investment in artificial intelligence supported semiconductor and technology shares, but this strength masked widespread weakness elsewhere. The divergence suggests that investors remained willing to back established growth businesses while becoming more cautious towards smaller companies and economically sensitive sectors. European equities also struggled. France’s CAC 40 fell by 4.16%, and Germany’s DAX declined by 4.03%, while the Euro Stoxx 50 lost 2.22%. Spain and Italy recorded declines of 2.73% and 2.28%, respectively. Higher sovereign yields and renewed inflation concerns created a challenging backdrop, with French borrowing costs attracting particular scrutiny. The UK was comparatively resilient with the FTSE 100 fell by 1.96%, and the FTSE 250 declined by 1.43%, with strength in energy shares helping to cushion the wider market’s losses.
Asian markets showed considerable variation. India’s Nifty 50 fell by 6.03%, Indonesia’s Jakarta Composite declined by 6.87% and mainland China’s CSI 300 lost 5.59%. Higher oil prices and tighter global financial conditions were particularly challenging for energy-importing economies, while weakness in Chinese consumption, investment and property continued to weigh on sentiment. Taiwan moved in the opposite direction, gaining 4.09%, as semiconductor demand offered support. Japan’s Nikkei 225 also advanced by 1.22%, reflecting the relative resilience of technology-related businesses despite rising domestic interest rates. There were pockets of strength beyond the major markets. Brazil’s Ibovespa gained 5.03%, the strongest return among the markets covered, while Portugal’s PSI rose by 2.43% and the Malta Stock Exchange Total Return Index advanced by 2.55%. Romania, by contrast, recorded the largest decline at 7.72%. These differences underline September’s uneven investment environment: broad market sentiment weakened, but selected countries and technology-focused indices continued to deliver positive returns.
FIXED INCOME MARKETS came under widespread pressure during September 2026, as renewed inflation concerns and rising government bond yields outweighed coupon income. Higher oil prices linked to the unresolved US–Iran conflict, resilient economic activity and concerns over government borrowing reinforced expectations that interest rates would remain elevated. Both the Federal Reserve and the European Central Bank increased policy rates by 0.25 percentage points during the month, adding to the challenging backdrop for bonds. Longer-dated government bonds suffered the largest losses, highlighting the impact of duration when yields rise sharply. US Treasuries with maturities beyond 15 years fell by 5.00%, compared with declines of 3.33% for 7-10 year maturities and 0.97% for 1-5 year maturities. Euro government bonds followed a similar pattern with maturities beyond 15 years lost 4.18%, while 10-15year bonds declined by 3.60% and 1-3 year bonds fell by just 0.44%. The US ten-year Treasury yield rose by approximately 54 basis points to 5.29%, illustrating the scale of September’s repricing.
UK government bonds also declined, although losses were more contained. Gilts with maturities beyond 15 years fell by 1.85%, seven-to-ten-year gilts lost 1.61% and one-to-five-year gilts declined by 0.52%. Sterling government bills delivered a positive return of 0.33%, showing the relative protection offered by very short maturities. Elsewhere, Chinese government bonds gained 0.28% and Chinese corporate bonds returned 0.24%, providing rare pockets of positive performance. Investment-grade corporate bonds were affected by both higher underlying government yields and widening credit spreads. US corporate bonds declined by 2.72% in unhedged US dollar terms, while euro corporate bonds lost 1.33% and sterling corporate bonds fell by 1.14%. Global investment-grade spreads widened by around five basis points during September, adding to the pressure from rising yields.
High-yield markets also struggled, as investors demanded greater compensation for credit risk. Global high-yield bonds declined by 2.79% in unhedged US dollar terms and by 2.67% on a euro-hedged basis. US corporate high yield lost 2.52%, compared with declines of 1.80% for European high yield and 1.61% for sterling high yield. Within Europe, CCC-rated and lower-rated bonds fell by 2.33%, under-performing BB-rated bonds, which lost 1.80%, and single-B bonds, which declined by 1.64%. Global high-yield spreads widened by around 42 basis points, leaving investors exposed to both interest rate and credit pressures. Emerging-market debt faced similar headwinds. Emerging-market high yield fell by 3.08%, while investment-grade debt declined by 2.82% in unhedged US dollar terms. September saw US$7 billion of outflows from emerging-market fixed income as higher US yields and a stronger dollar reduced demand. Currency exposure also
materially affected reported returns: emerging-market investment-grade debt lost a more modest 0.62% in unhedged euro terms. Across the month, shorter maturities generally preserved capital more effectively, while longer-duration bonds and weaker credits experienced the greatest pressure.
The Middle Eastern conflict remained a major influence on the global economy throughout September. Disruption to energy infrastructure and shipping routes kept supply concerns elevated, with Brent crude trading above US$100 a barrel. The prolonged uncertainty placed additional pressure on business costs and household purchasing power, making the inflation outlook more difficult for policymakers to manage. What had initially appeared to be a potentially short-lived economic shock was increasingly becoming a persistent challenge. Relations between the United States and China offered some relief on the trade front. September’s diplomatic discussions and the Trump–Xi summit in Washington secured a two-month extension of their trade truce, giving negotiators until January 2027 to pursue a broader agreement. This reduced the immediate risk of renewed tariff escalation, although the limited extension left considerable uncertainty over the longer-term
relationship. Trade, technology and strategic competition remained central to the negotiations.
Important Information:
This article was prepared by Jesmar Halliday, CFA, Portfolio Manager at MZ Investments and is intended solely for information purposes. The contents of this article should not be construed as investment, legal or tax advice, or as a recommendation to buy, sell, or hold any securities, investment strategy or market sector. The information contained in this article was obtained from sources believed to be reliable and has not been verified independently. MZ Investments, its directors and employees give no warranties of any kind, expressed or implied, with regard to the accuracy, correctness or completeness of this article and accepts no responsibility or liability for any loss or damages arising out of the use of all or any part of this article. MZ Investments is under no obligation to update or keep current the information contained therein. All investments involve risk. The value of investments may go down as well as up and investors may not get back the amount originally invested. Investors are urged to seek professional advice before making investment decisions.
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