Wednesday 9/16/2026 p.m.

• Stocks slide as the Fed tightens policy – Equity markets slipped today after the Fed raised interest rates for the first time in three years and signaled another rate hike before the end of the year. The Dow Jones Industrial Average was among the worst hit of the major indexes, falling 1.2% over the session, while the S&P 500 was down a smaller 0.5% and the tech-centric Nasdaq index was flat. The reaction in bond markets was mixed. Shorter-dated bonds sold off sharply as investors likely contemplate higher interest rates over coming years, with the 2-year U.S. Treasury yield up 7 basis points (0.07%). However, longer-dated bonds performed better, with the 10-year Treasury broadly unchanged over the day, as investors potentially take heart from the Fed's determination to bring inflation under control. The hawkish Fed supported the dollar against a trade-weighted basket of currencies, and oil prices slid almost 4% to $102 per barrel, likely helped by headlines that recent supply outages in the Middle East might be resolving.
   
• Not one-and-done from the Fed – Today's unanimous decision by the Federal Reserve Open Market Committee (FOMC) to raise interest rates by 25 basis points (0.25%) came as little surprise to markets. However, the signals around the direction for future policy were seemingly more hawkish than investors anticipated. First, most members signaled that further tightening will most likely be appropriate. Sixteen officials penciled at least one more hike this year into their interest rate forecasts, with only two anticipating no further change in rates. Moreover, while the median FOMC forecast in 2027 was for interest rates to remain steady in the 4-4.25% range, eight members are forecasting higher rates, suggesting that it would not take much to build consensus for additional tightening. Second, Chair Warsh struck a hawkish tone at the FOMC press conference, emphasizing his concerns over sticky underlying inflation pressures. Tellingly, the chair characterized today's move as "removing a dose of policy accommodation", indicating that he does not see policy as restrictive at these levels, and implicitly supporting the case for further hikes. Overall, today's move, in our view, reflects the start of a modest recalibration in policy settings as the Fed looks to hasten the return of inflation back to target. While this adjustment will provide a headwind to growth, we do not think it will threaten the business cycle unless we see a much more aggressive tightening cycle than hinted at in today's meeting.
   
• Retail sales continue to point to resilient consumers – U.S. retail sales rebounded smartly in August, providing an encouraging indication of the strength of consumer spending and the underlying strength of growth. Headline sales were up 1.2% over the month, more than reversing a 0.5% decline in July that now looks to have been caused by seasonality. Spending was broad-based, with all subsectors aside from building materials registering higher sales over August. Looking through the noise in recent reports, the pace of underlying consumer spending looks to be advancing at a healthy rate, in our view. This should help provide some reassurance around the resilience of the U.S. economy in the face of increasing short-term headwinds to growth, including higher interest rates, a renewed spike in oil prices, trade disruptions, and waning support from tax cuts.

James McCann;
Investment Strategy

^{Source for all data: FactSet.}