LCI Monthly – Markets in September 2026
Executive Summary
Global equities fell in September, with the world index down 1.2% in USD, as a synchronised round of rate hikes met a fresh oil spike. The Federal Reserve, the ECB, the Bank of Japan and the Reserve Bank of Australia all tightened during the month, Brent rose by more than 10% as US–Iran talks stalled, and the US 10-year Treasury yield climbed above 5% for the first time since 2007. Technology was the one large pocket of strength, which kept the cap-weighted indices well ahead of the average stock. Bonds lost ground across every segment, and the US dollar rebounded, leaving the Swiss franc weaker against both the dollar and the euro.
Equity Markets – Regional Performance
1-month returns in local currency
North America
The United States was roughly flat, down less than half a percent, and as the heaviest weight in the world index it kept the global decline contained. The headline masked very narrow leadership: the S&P 500 Top 20 gained close to 4% and the S&P 500 Growth index about 2%, while the equal-weighted S&P 500 fell close to 5% and mid caps dropped about 4%. Equities absorbed a 25 basis-point Fed hike on 16 September, the first increase since July 2023, and a 10-year yield that closed the month near 5.3%. A softer-than-expected August PCE report on the last day of the month (core at 3.0% year on year against 3.3% expected) brought some late relief. The US market trades on a P/E of 25.8. Canada fell roughly 2.5%, with the TSX’s materials sector down about 7% as metal prices retreated mid-month.
Europe
European equities posted their first monthly loss in six months as rising bond yields, driven by Middle East inflation risks, weighed on the market, and the ECB raised its deposit rate by 25 basis points to 2.50% on 10 September. The Eurozone fell close to 2% and the United Kingdom about 2%. France and Germany were the weakest of the larger markets, each down about 4%, with Italy off about 3% and Spain about 2%. Switzerland declined roughly 2.5%; the Swiss National Bank held its policy rate at 0% on 24 September.
Asia-Pacific
South Korea was the region’s best performer, up about 2%, as Samsung Electronics and SK Hynix were supported by renewed AI optimism, partly retracing the sharp correction of the summer. Japan finished flat; the Bank of Japan raised its policy rate to 1.25%, the highest since 1995. Australia fell about 2% as the RBA hiked towards the end of the month in response to elevated inflation. China dropped about 5% and touched a one-year low, as new credit and mortgage support measures fell short of lifting confidence and chip and technology shares slid. India lost about 6%, its worst month since March, as higher oil prices and global rate hikes drove 2.7 billion dollars of foreign selling, with IT services and financials leading the decline. Indonesia was the weakest market in our universe, down close to 7% on heavy foreign outflows.
Latin America
Brazil was the best-performing market of the month, up about 3%, led by the large banks and helped by the softer US inflation data and a further cut to the Selic rate. Mexico fell about 1.5%, its fourth consecutive monthly decline, as the Fed hike and higher US yields narrowed Mexico’s rate advantage. Brazil remains the cheapest market in our universe on a P/E of 9.3.
Equity Markets – Sector Performance
1-month returns in USD
Only two sectors rose. Information Technology gained more than 4%, carried by semiconductors on continued AI-infrastructure demand, and Communication Services added about 3%. Because Information Technology is by far the largest sector in the world index, its gain offset a large part of the broad declines elsewhere, which is why the world index fell only about 1% while eight of ten sectors lost between roughly 2% and 7%. Materials was the weakest sector, down about 7%, after copper, silver and gold sold off on 10 September when the White House signalled it had not finalised refined-copper tariffs. Consumer Discretionary fell about 6%, and Financials and Utilities each lost about 5%, the latter consistent with rate-sensitive sectors suffering as yields rose. Industrials and Consumer Staples dropped about 4%, while Health Care and Energy held up better, each down close to 2%; energy shares slipped despite the rise in crude. Information Technology trades on a P/E of 31.2 and Health Care on 31.9, against 14.9 for Financials.
Fixed Income
Bonds had a difficult month as inflation worries tied to the Middle East conflict and a wave of central-bank tightening pushed yields higher. US Treasuries fell about 2.5%, US investment-grade corporates and US high yield each about 2.5%, with the 10-year Treasury yield breaking above 5% in mid-September. In euros, government bonds lost about 2%, investment-grade corporates and high yield each about 1.5%. Emerging-market debt was hit by the stronger dollar and higher US yields, with sovereigns down about 3% and corporates about 2.5%. Yields to maturity now stand at 4.65% for US Treasuries, 5.53% for US investment grade, 7.23% for US high yield, 3.53% for euro government bonds and 6.07% for EM sovereigns.
Forex
The dollar rose in September after two months of losses, supported by the Fed hike and the jump in US yields. EUR/USD fell about 2.5% to around 1.13 and GBP/USD about 2%. The Swiss franc weakened: USD/CHF rose more than 3% to around 0.84 as the SNB held rates at 0% while the Fed tightened, widening the rate gap, and EUR/CHF edged up about 1% to around 0.95. For a franc-based investor the weaker currency turned the world equity index’s loss into a gain of roughly 2% in CHF terms. USD/JPY eased about 1% to around 158 despite the BoJ hike. Among emerging currencies the Mexican peso stood out, losing about 6% against the dollar as Mexico’s rate advantage narrowed.
Outlook
September marked a clear turn in the rate cycle: the Fed, ECB, Bank of Japan and RBA are all tightening against oil-driven inflation, and the Fed’s projections point to one more hike this year. The softer August PCE print has already cut the odds of another Fed move in October, so the next inflation releases and the path of oil, which hinges on the stalled US–Iran talks, will set the tone. Equity leadership is very narrow and concentrated in highly valued technology, which leaves the indices exposed if AI sentiment turns, while yields near multi-year highs make high-quality bonds a more meaningful source of income than for many years. We remain diversified and selective, with attention to duration and currency exposure.
La Côte Invest SA – Monthly Markets Commentary, September 2026.
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