Rates, Oil, and Resilience:
The Market’s Balancing Act
SEPT 26
September opened with markets confronting a less comfortable mix of resilient growth, sticky inflation, and renewed energy pressure. Escalating conflict involving Iran disrupted oil flows through the Strait of Hormuz and Red Sea routes, pushing crude prices higher and reviving concerns that the energy shock could keep inflation elevated. Treasury yields climbed alongside oil, with the 10-year yield briefly reaching 5.04%, its highest level since 2007. Higher borrowing costs and a stronger case for Federal Reserve tightening weighed on risk appetite, leaving stocks under pressure even as the broader economy continued to show resilience.
Energy became the clearest relative winner as rising crude prices supported the sector, while rate-sensitive and growth-oriented areas faced more pressure. Semiconductor shares sold off sharply after leading artificial intelligence executives called for a slower pace of AI development to better address safety risks, raising questions about the durability of the infrastructure spending boom that has supported chip demand. Stocks initially fell after the Federal Reserve’s September 16 decision and Chair Kevin Warsh’s press conference, but rebounded on September 17 as oil prices and Treasury yields eased.
Economic data reinforced the picture of an economy that remains resilient despite persistent inflation. Employers added 162,000 jobs in August, well above expectations, while the unemployment rate held at 4.1%, signaling that labor demand remained firm enough to absorb tighter policy1. The Consumer Price Index (CPI) also rose 0.4% for the month and 3.4% from a year earlier, while core CPI, which excludes food and energy, increased 0.3%2. Retail sales then jumped 1.2% in August after a revised 0.5% decline in July, showing that consumer spending remained firm3. Even excluding gasoline purchases, sales rose 1.1%, suggesting the increase reflected more than higher fuel prices3. The Federal Reserve responded by raising its target rate by 0.25 percentage point to 3.75%-4.00%, its first increase since 2023. The unanimous decision was paired with a firmer message on inflation. Warsh emphasized that inflation remains elevated even as economic activity and consumer spending continue to hold up, while updated projections showed a median year-end policy rate of 4.1%, consistent with one additional quarter-point increase this year.
The Bottom Line
September reinforced the tension between an economy proving more durable than expected and inflation that remains too firm for the Fed to ease policy. Strong consumer spending and a resilient labor market give policymakers room to keep rates restrictive, while elevated oil prices and Treasury yields remain potential headwinds for markets. The next phase will depend on whether tighter financial conditions and easing energy pressures begin to cool inflation without materially weakening growth. For investors, that leaves incoming inflation and labor data, along with the path of oil and long-term yields, at the center of the outlook.
Advisory services offered through NewEdge Advisors, LLC, a registered investment adviser. NewEdge Advisors, LLC is a wholly owned subsidiary of NewEdge Capital Group, LLC. This information should not be duplicated or distributed unless express written consent is obtained from Tempus Advisory Group in advance. The views expressed here reflect the views of the Tempus Advisory Group Investment Committee as of 07-17-2026. These views may change as market or other conditions change. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Past performance does not guarantee future results and no forecast should be considered a guarantee either.
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