Friday 9/11/2026 a.m.

• Markets rise despite upside surprise in core inflation – U.S. equity markets are trading higher Friday morning following the August consumer price index (CPI) report. Headline CPI rose 3.4% from a year ago, while core prices increased 2.4%. On a monthly basis, headline CPI rose 0.4%, in line with expectations, while core inflation increased 0.3%, above the 0.2% consensus estimate. Despite the upside surprise in monthly core inflation, stocks are moving higher as a pullback in oil prices provides some relief. The decline follows reports that several Gulf states could meet with Iran next week to discuss a temporary agreement aimed at easing hostilities and managing shipping through the Strait of Hormuz. WTI crude is trading back below $100 per barrel but remains firmly higher for the week. In bond markets, short-term yields are moving higher, reflecting increased expectations for a Federal Reserve rate hike at next week’s meeting. Longer-term yields are pulling back, however, with the 10-year Treasury yield beginning the day around 4.92%.
   
• Elevated inflation shifts odds further toward a rate hike at next week's meeting – The August consumer price index (CPI) report showed that inflationary pressures remained uncomfortably high. Headline CPI rose 0.4% for the month, while core prices, which exclude food and energy, increased 0.3%. On an annual basis, headline CPI rose 3.4%, while core prices were 2.4% higher than a year ago. Looking beneath the headline figures, energy prices rose 2.1% for the month and contributed to the increase in overall inflation. However, upward price pressures were also evident outside the energy category. Notably, transportation services rose 0.5%, perhaps providing an early indication that the effects of higher energy prices are beginning to surface in other areas of the inflation basket. Following the August inflation report, futures markets are now assigning a roughly 84% probability of an interest-rate hike at next week’s meeting. With core inflation having remained above 2% since 2021, and elevated geopolitical uncertainty contributing to higher oil prices and clouding the inflation outlook, we believe a rate hike at next week’s meeting is the most likely outcome. However, we expect any renewed tightening to be relatively short-lived, particularly compared with the previous tightening cycle that began in 2022. Importantly, we do not expect renewed tightening to derail the broader bull market or economic expansion.
   
• Positive end to a choppy week – Equity markets found their footing on Friday following a volatile week characterized by rising bond yields, elevated oil prices, and uncomfortably high inflation readings. Friday’s rebound is likely being driven in part by some relief in oil prices following reports that several Gulf states could meet with Iran next week to pursue an agreement to ease hostilities. The pullback in oil prices is also contributing to lower long-term bond yields, providing additional support to equity markets, in our view. Looking ahead, lingering uncertainty in the Middle East, the approaching midterm elections, and what has historically been a seasonally weak month for stocks could contribute to a period of consolidation following this year’s strong run. However, we believe the longer-term outlook for stocks remains supportive, with several positive fundamental drivers likely to outweigh potential near-term volatility. S&P 500 earnings are on pace to grow by more than 30% in 2026, labor-market conditions remain supportive, and business investment trends have been strong. Against this backdrop, we continue to recommend equities over fixed income, specifically favoring U.S. large- and mid-cap stocks along with emerging-market equities.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}