Interest Rate Uncertainty, Corporate Earnings, and AI’s Growth Shape September’s Market Outlook

September opened with markets contending with a renewed spike in oil prices tied to the ongoing conflict involving Iran. As of September 9, 2026, the Dow Jones Industrial Average declined by approximately 1,000 points over the prior two trading days as oil prices moved back toward $100 per barrel (Source: Tradingview). Continued disruption to shipping through the Strait of Hormuz has contributed to pressure on global oil supplies and prices (Source: insert here). These dynamics have renewed inflationary concerns and further complicated the choices facing the Federal Reserve. At the same time, strong corporate earnings, continued investment in artificial intelligence (AI), and a resilient labor market have provided reasons for optimism despite the uncertainty. .

Corporate earnings have remained a clear bright spot amid the uncertainty. First-quarter earnings growth reached the mid-20% range, followed by even stronger results in the second quarter (Source: IEA). Forward guidance for the third quarter once again points to earnings growth in the mid-to-upper 20% range, which would mark a third consecutive quarter of historically elevated earnings growth (Source: Factset). Since corporate earnings remain one of the primary drivers of stock prices, this level of sustained profitability has continued to support broader economic activity, including employment and other areas of the economy.

The AI buildout underway across the economy remains historic in scale, but its impact extends well beyond the technology companies driving it directly. Billions of dollars in infrastructure investment are also creating demand across a wide range of ancillary industries that support the buildout. Copper prices, for example, have risen approximately 47% over the past year, with growing demand from AI data centers and power grid expansion among the factors supporting the increase (Source: Kobeissi Letter). Construction, concrete and other resource-intensive industries may similarly benefit from the infrastructure required to support AI.

Despite concerns about AI’s impact on the labor market, recent employment data has come in strong. The August 2026 nonfarm payroll report, released on September 4, 2026, showed a gain of approximately 162,000 jobs, with prior months revised higher by a combined 20,000 (Source: BLS). The unemployment rate stands at 4.1 percent.

Looking ahead, the Federal Reserve may consider a modest rate increase in the range of 25 basis points as a signal that policymakers remain focused on inflation, rather than the beginning of an extended tightening campaign. While a single quarter-point increase may have a limited effect on markets, a sustained series of rate hikes would represent a more meaningful shift in the interest-rate environment.

Even without additional Fed action, Treasury yields have already moved significantly higher. As of September 9, 2026, the 10-year Treasury yielded approximately 4.84%, while the 30-year Treasury was yielding approximately 5.3% (Source: Tradingview). While higher rates increase borrowing costs, they can also create opportunities for income-oriented investors, particularly in areas such as municipal bonds, where yields remain at historically attractive levels (Source: Tradingview).

At the same time, higher government borrowing costs have brought renewed attention to fiscal policy. Ongoing efforts by the U.S. Treasury to repurchase bonds have had limited market impact. The underlying challenge remains the level of outstanding government debt, which recently surpassed 40 trillion dollars (Source: Yahoo Finance). Rising borrowing costs are not unique to the United States, with several other developed economies also facing higher rates tied to elevated debt levels, keeping fiscal policy and government borrowing in focus heading into the fall. .

Despite these uncertainties, market performance has remained broad. The S&P 500 was up approximately 12% for the year as of September 9, while the equal-weighted S&P 500 had delivered a similar return (Source: Tradingview).This suggests market gains are extending beyond the largest technology companies, with small-cap, international, and emerging-market stocks also contributing to performance (Source: Franklin Templeton). For diversified investors, this broader market participation has continued to reinforce the benefits of maintaining exposure across asset classes, market capitalizations, and geographies.

Important Disclosures:

This commentary is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security.
Forward-looking statements are based on current market conditions and are subject to risks and uncertainties. Actual results may differ materially.
Past performance does not guarantee future results. All investments involve risk, including possible loss of principal.