Thu, October 1, 2026 | 7:50AM ET

Equity markets flat in Sept in face of surging headwinds. October macro looks "less bad" = good, meaning better risk/reward ahead.

The S&P 500 limped into month end with a “whimper” finishing the month essentially flat (down -0.4%). This is not the worst outcome given that incoming news for the month was “bad” and “worse” than expected.

September “negative” developments weighing in on markets:
– Fed Chair Warsh became a “full blown hawk” and raised rates +25bp
– August jobs report was surprisingly strong with 162,000 jobs added = hawkish
– US 10Y surged from 4.75% to 5.29%, +54bp
– US WTI oil hit $105 per barrel but for the month $85.76 to $88.89, +3.6%
– September is a seasonally bad month in a midterm year
In spite of these negative developments and headwinds, the S&P 500 managed a better than expected outcome of flat. To us, this is a somewhat disappointing outcome given that market sentiment had been so negative and that markets had reached an oversold status earlier in the month.
But to us, the bigger takeaway might be that despite these substantial headwinds, particularly the surge in yields. Bond yields rose to nearly 20 year highs and these gains have been seen around the world. A US 10-year bond yielding 5.3% is becoming somewhat competitive as a total return prospect.
Why are yields are rising? There are several possible explanations:
– fiscal deficits are creating credit risk
– AI spending and borrowing is competing for debt markets
– markets might see “long-term inflation” as higher
– term premium is rising, meaning uncertainty is adding to “yield” for longer years
– Fed might have signaled need to “crush” inflation sending cost of capital higher
Who knows? And this is why markets were unsettled for the month. But again, we view the flat performance of equities as evidence that underlying equity fundamentals have been strong. That is, the stock market should have been far stronger in the month, if bond yields did not surge in the month.
There are some positives that have developed as we exit September and move into October:
– the gap between Core PCE (3.0% now) vs Core CPI (2.35% now) is narrowing
– gap is now 65 bp versus 100bp last month
– odds of a Fed hike in Oct dropped to 36% from >75% after Fed’s Warsh “hawkish declaration”
– WTI oil has been downtrending for the past few weeks, after surging to $105
– US yields have risen for 7 months, and rarely in 75 years, manage to further rise beyond that
So, the setup for macro surprise in October might actually be more sanguine. Think about this:
– Fed fund futures show Fed likely to pause = dovish walkback
– Sept jobs report (Friday) could be soft = dovish walkback
– Oil, if weaker, is disinflationary and could lower yields
This past 3Q26 was a challenging macro period for markets mainly because of the combination of factors mentioned above. That is, a hawkish pivot by the Fed and the surge in oil and yields. Moreover, the war continues to be the “long war.” In the face of this, here are the standout performers:
– Ethereum (ETH 0.35% ) and crypto with ETH leading by 6,830bp
– Software (IGV) outperforming by 1,550bp
– MAG7 (MAGS) outperforming by 940bp
– IGV and MAGS are “AI downstream” names and we had expected them to lead as AI corrected
– Energy given oil outperforming by 1,200bp
Of the above, Energy is not a surprise. But Crypto and MAGS and IGV showed considerable resilience in the face of a significant tightening of financial conditions (rates) and a hawkish Fed. To us, that is what we expect to lead in 4Q26 as well.
In other words, we think the second half of 2026 will see leadership from:
– Ethereum and crypto –> full blown bull market underway
– MAGS and software IGV as AI downstream stories
– Energy is subject to how oil performs, which is an unknown
This week is a big week for macro data:
– 9/28 Mon 10:30 AM ET: Sep Dallas Fed Manuf. Activity Survey    10 vs 8e
– 9/29 Tue 9:00 AM ET: Jul S&P Cotality CS 20-City MoM SA    0.32% vs 0.20%
– 9/29 Tue 10:00 AM ET: Sep Conference Board Consumer Confidence    82 vs 89e
– 9/29 Tue 10:00 AM ET: Aug JOLTS Job Openings    7079k vs 7228ke
– 9/30 Wed 8:30 AM ET: Annual PCE & GDP Revision
– 9/30 Wed 8:30 AM ET: Aug Core PCE:
– Aug Core PCE MoM 0.25% vs 0.27%e
– Aug Core PCE YoY 3.01% vs 3.28%e
– 9/30 Wed 8:30 AM ET: 2Q T GDP QoQ    2.2% vs 1.5%e
– 10/1 Thu 9:45 AM ET: Sep F S&P Global Manufacturing PMI    57.0e
– 10/1 Thu 10:00 AM ET: Sep ISM Manufacturing PMI    54.9e
– 10/2 Fri 8:30 AM ET: Sep Non-farm Payrolls    90ke
– 10/2 Fri 10:00 AM ET: Aug F Durable Goods Orders MoM    0.0%e
In the coming week, there will be a lot of Fed speak, and this, in our view, will result in FOMC walking back on the “max hawkish” words of Warsh:
– 9/29 Tue 1:00 PM ET: Goolsbee Speaks in Moderated Discussion
– 9/29 Tue 2:00 PM ET: Williams Gives Keynote Remarks (voting)
– 9/30 Wed 1:30 PM ET: Barkin Gives Welcome Remarks at Rural America Conference
– 9/30 Wed 3:25 PM ET: Cook Speaks at Investing in Rural America Conference (voting)
– 9/30 Wed 5:10 PM ET: Goolsbee Gives Keynote Address
– 9/30 Wed 6:00 PM ET: Kashkari Speaks in Fireside Chat (voting)
– 10/1 Thu 9:05 AM ET: Barkin, Collins, Schmid on Panel About Rural America
– 10/1 Thu 3:30 PM ET: Cook and NY Fed’s Williams at Panel (voting)
– 10/1 Thu 6:45 PM ET: Logan Speaks At Eleventh District Appreciation Event (voting)

Bottom line: We expect stocks to rally into month-end

We realize investors feel worn down by the churning in the month of September. There were multiple negative macro developments in the past month. The headwinds are expected to be less severe in October. And as Tom Luddy and Susan Bao, both of JPMorgan, have told me many times, over the years, “less bad is good.” That may be the setup for October.

Foremost, we believe underlying fundamentals remain solid
Investor sentiment remains cautious and this adds asymmetry to risk/reward
Equities saw a waterfall decline in the past week. In mid-August, such a waterfall decline was followed by a rally
Incremental data, in our view, will be dovish, which will fuel further upside

The strength in crypto remains notable. Ethereum ETH 0.35% remains the best performing major macro asset in 3Q26. This bodes well for crypto to outperform in 4Q26.

Equity markets flat in Sept in face of surging headwinds. October macro looks less bad = good, meaning better risk/reward ahead.

Part I: 46 Large-cap Core Ideas: Updated list is below

Large-Cap Core Stock Ideas are large-cap stocks that appear in multiple of our investment strategies.

Consider these stocks our top stock picks and thus, the higher quality ideas.

The Current Large-cap Core List as of 8/21/2026 is as follows:

Communication Services: ECHO, GOOGL, NFLX
Consumer Discretionary: AMZN, TJX, TSLA
Consumer Staples: COST, MNST, PM, WMT
Energy: OKE
Financials: BNY, GS, HOOD, JPM
Health Care: LLY, MRK, UNH
Industrials: CAT, DE, ETN, GE, GEV, LMT, PWR, SPCX, TT, UNP, VRT
Information Technology: AAPL, AMD, ANET, CDNS, INTC, KLAC, MSFT, MSTR, MU, NOW, NVDA, ORCL, PLTR
Materials: CF, FCX, PKG
Utilities: VST

Part II: 65 SMID Core Ideas: Updated list is below

SMID Core Ideas are small and mid-cap stocks that appear in multiple of our investment strategies.

We believe SMID Core List could benefit from the multiple themes and secular tailwinds.

The Current SMID Core List as of 8/21/2026 is as follows:

Communication Services: ECHO, RDDT, TIGO
Consumer Discretionary: DKS, SGI, SN
Consumer Staples: BG
Energy: CCJ, DINO, DTM
Financials: ALLY, CFR, EWBC, GLXY, SOFI, WAL
Health Care: EXEL, HALO, NTRA, PGEN
Industrials: ALNT, AVAV, BE, BWXT, CRS, CW, DY, ENS, FIX, HII, IESC, KTOS, MLI, MOD, NVT, NXT, QXO, RKLB, STRL, VICR, VMI, WTS
Information Technology: AMKR, CRDO, FORM, FN, FSLR, IONQ, LITE, LSCC, MDB, MKSI, NBIS, P, PATH, RIOT, RMBS, SANM, TTMI, ZETA, ZM
Materials: ALB, MP, RGLD
Utilities: TLN

Key Incoming Data September:

~~9/1 9:45 AM ET: Aug F S&P Global Manufacturing PMI~~ Tame
~~9/1 10:00 AM ET: Jul JOLTS Job Openings~~ Tame
~~9/1 10:00 AM ET: Aug ISM Manufacturing PMI~~ Tame
~~9/2 10:00 AM ET: Jul F Durable Goods Orders~~ Tame
~~9/3 8:30 AM ET: 2Q F Unit Labor Costs~~ Tame
~~9/3 8:30 AM ET: 2Q F Non-Farm Productivity~~ Tame
~~9/3 8:30 AM ET: Jul Trade Balance~~ Tame
~~9/3 9:45 AM ET: Aug F S&P Global Services PMI~~ Tame
~~9/3 10:00 AM ET: Aug ISM Services PMI~~ Tame
~~9/4 8:30 AM ET: Aug Non-Farm Payrolls~~ Hot
~~9/8 6:00 AM ET: Aug Small Business Optimism Survey~~ Tame
~~9/8 11:00 AM ET: Aug NY Fed 1yr Inf Exp~~ Tame
~~9/10 8:30 AM ET: Aug PPI~~ Tame
~~9/10 10:00 AM ET: Aug Existing Home Sales~~ Tame
~~9/11 8:30 AM ET: Aug CPI~~ Tame
~~9/11 10:00 AM ET: Sep P U. Mich. Sentiment and Inflation Expectation~~ Mixed
~~9/15 8:30 AM ET: Sep Empire Manufacturing Survey~~ Tame
~~9/16 8:30 AM ET: Aug Retail Sales Data~~ Tame
~~9/16 10:00 AM ET: Sep NAHB Housing Market Index~~ Tame
~~9/16 2:00 PM ET: Sep FOMC Decision~~ Hawkish
~~9/16 4:00 PM ET: Jul Net TIC Flows~~ Tame
~~9/17 8:30 AM ET: Sep Philly Fed Business Outlook~~ Tame
~~9/21 8:30 AM ET: Aug Chicago Fed Nat Activity Index~~ Tame
~~9/22 10:00 AM ET: Sep Richmond Fed Manufacturing Survey~~ Tame
~~9/23 9:45 AM ET: Sep P S&P Global Services PMI~~ Hot
~~9/23 9:45 AM ET: Sep P S&P Global Manufacturing PMI~~ Hot
~~9/24 10:00 AM ET: Aug New Home Sales~~ Tame
~~9/24 11:00 AM ET: Sep Kansas City Fed Manufacturing Survey~~ Tame
~~9/25 8:30 AM ET: Aug P Durable Goods Orders~~ Tame
~~9/25 10:00 AM ET: Sep F U. Mich. Sentiment and Inflation Expectation~~ Tame
~~9/28 10:30 AM ET: Sep Dallas Fed Manuf. Activity Survey~~ Tame
~~9/29 9:00 AM ET: Jul S&P Cotality CS 20-City MoM SA~~ Tame
~~9/29 10:00 AM ET: Aug JOLTS Job Openings~~ Tame
~~9/29 10:00 AM ET: Sep Conference Board Consumer Confidence~~ Tame
~~9/30 8:30 AM ET: 2Q T GDP~~ Tame
~~9/30 8:30 AM ET: Aug PCE Deflator~~ Tame

Key Incoming Data October:

10/1 9:45 AM ET: Sep F S&P Global Manufacturing PMI
10/1 10:00 AM ET: Sep ISM Manufacturing PMI
10/2 8:30 AM ET: Sep Non-Farm Payrolls
10/2 10:00 AM ET: Aug F Durable Goods Orders
10/5 9:45 AM ET: Sep F S&P Global Services PMI
10/5 10:00 AM ET: Sep ISM Services PMI
10/6 8:30 AM ET: Aug Trade Balance
10/7 11:00 AM ET: Sep NY Fed 1yr Inf Exp
10/7 2:00 PM ET: Sep FOMC Meeting Minutes
10/9 10:00 AM ET: Oct P U. Mich. Sentiment and Inflation Expectation
10/13 6:00 AM ET: Sep Small Business Optimism Survey
10/13 10:00 AM ET: Sep Existing Home Sales
10/14 8:30 AM ET: Sep CPI
10/14 2:00 PM ET: Fed Releases Beige Book
10/15 8:30 AM ET: Sep PPI
10/15 8:30 AM ET: Oct Philly Fed Business Outlook
10/15 8:30 AM ET: Sep Retail Sales Data
10/16 4:00 PM ET: Aug Net TIC Flows
10/19 10:00 AM ET: Oct NAHB Housing Market Index
10/22 11:00 AM ET: Oct Kansas City Fed Manufacturing Survey
10/23 9:45 AM ET: Oct P S&P Global Services PMI
10/23 9:45 AM ET: Oct P S&P Global Manufacturing PMI
10/23 10:00 AM ET: Oct F U. Mich. Sentiment and Inflation Expectation
10/26 8:30 AM ET: Sep Chicago Fed Nat Activity Index
10/26 10:30 AM ET: Oct Dallas Fed Manuf. Activity Survey
10/27 8:30 AM ET: Sep P Durable Goods Orders
10/27 9:00 AM ET: Aug S&P Cotality CS 20-City MoM SA
10/27 10:00 AM ET: Sep New Home Sales
10/27 10:00 AM ET: Oct Richmond Fed Manufacturing Survey
10/27 10:00 AM ET: Oct Conference Board Consumer Confidence
10/28 2:00 PM ET: Oct FOMC Decision
10/29 8:30 AM ET: 3Q A GDP
10/29 8:30 AM ET: Sep PCE Deflator
10/30 8:30 AM ET: 3Q Employment Cost Index

Economic Data Performance Tracker 2026:

Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023:

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