Growth Holds Firm as Rates Move Higher

1. Fed Hikes, but the Economy Keeps Moving The Fed was the main focus last week, raising the federal funds target range by 25 basis points to 3.75%–4.00%, marking its first rate increase in more than three years.¹ The updated dot plot pointed to a higher-for-longer rate environment, with 16 of 18 officials expecting at least one additional hike by the end of 2026 and four projecting two more increases. While the path for rates has moved higher, we are not overly concerned by the latest decision. The underlying economic data continues to point to a resilient economy, giving the Fed room to keep policy restrictive without necessarily derailing growth.

2. The Consumer Remains a Key Source of Strength One of the biggest positives from last week’s data was the strength of the consumer. Retail sales increased 1.2% in August, well ahead of the 0.8% consensus and a sharp rebound from the 0.5% decline in July.² More importantly, control-group sales, which provide a cleaner measure of underlying consumer demand, jumped 1.4% compared with a 0.5% expectation.³ Strength was broad-based, with gains in electronics, sporting goods, and restaurants suggesting consumers continue to spend across discretionary categories.

The labor market is also showing signs of stability. Initial jobless claims fell to 196,000, well below expectations, while continuing claims declined to 1.73 million.⁴ The four-week moving average also moved lower to 203,250.⁵ Taken together, the latest consumer and labor data suggest the economy continues to chug along despite higher interest rates. That resilience remains an important support for corporate earnings and equities.

3. Housing Is Mixed, While Risk Appetite Returns Housing data was more mixed, with August housing starts declining 2.6% to an annualized pace of 1.275 million, below the 1.32 million consensus.⁶ However, the headline masked some encouraging details, as single-family starts increased 7.6% while the larger decline came from multifamily construction.⁷ Permits were weaker across both segments, suggesting housing remains an area to watch as higher rates continue to weigh on activity.

Meanwhile, risk appetite has improved across markets. Bitcoin and Ethereum have moved higher despite the Senate’s vote on the Clarity Act, which failed to advance by a 49–50 vote.⁸ Bitcoin recently moved above $86,000, while Ethereum also gained, as lower oil prices and optimism surrounding U.S.-China trade discussions have supported broader risk appetite. Overall, the combination of resilient consumer spending, a stable labor market and improving risk sentiment continues to provide a constructive backdrop for equities.

4. Fixed Income U.S. Treasury yields were mixed across the curve last week as markets digested the FOMC’s first rate increase since 2023 and the Federal Reserve’s updated Summary of Economic Projections (SEP), which indicated that the median policymaker anticipates one additional 25 basis point increase before year-end. By Friday’s close, the 2-year and 10-year yields had risen by 12 and 3 basis points, respectively, while the 30-year yield declined by 4 basis points.⁹

Credit markets modestly improved last week, with tightening evident across both investment-grade and high-yield segments. Investment-grade spreads were tighter by 5 basis points to +111, while high-yield spreads narrowed 2 basis points to +300. In the tax-exempt market, front-end municipal yields rose by 14–18 basis points, while intermediate- and long-end yields increased by 2–6 basis points.¹⁰

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Return for Selected Indices¹¹

All charts are for illustrative purposes only. Past performance does not guarantee future results. Yield, if shown, are for informational purposes only, may change, and do not guarantee future income, return, or investment results. An index is a portfolio of specific securities (such as the S&P 500, Dow Jones Industrial Average and Nasdaq composite), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index.

Sources:

1. Bloomberg: As of September 16, 2026 ↩︎
2. Bloomberg: As of September 16, 2026 ↩︎
3. Bloomberg: As of September 16, 2026 ↩︎
4. Department of Labor: As of September 17, 2026 ↩︎
5. Department of Labor: As of September 17, 2026 ↩︎
6. Bloomberg: As of September 17, 2026 ↩︎
7. Bloomberg: As of September 17, 2026 ↩︎
8. Bloomberg: As of September 21, 2026 ↩︎
9. Bloomberg: As of September 21, 2026 ↩︎
10. Bloomberg: As of September 21, 2026 ↩︎
11. Bloomberg: As of September 21, 2026 ↩︎

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