September 25, 2026
Filed under: Market Commentary
As the September Federal Reserve meeting has come and gone, we now look out at a landscape that is rather confusing for most investors, individual and institutional. In case you’ve missed it, here is a high level summary and then our thoughts on what’s next and what to watch for:
- On September 16th, the Kevin Warsh-chaired Federal Reserve raised short-term interest rates by 0.25%. There was A LOT of speculation about Fed independence, where inflation is, etc… Short answer: the Fed is concerned about getting inflation down to its 2% mandated target.
- In the last two weeks, in an effort to bring down long-term interest rates, Treasury Secretary Scott Bessent, attempted to have the Federal Government buyback a decent amount of US Treasury securities thus driving prices up and yields/rates down (it’s an inverse relationship).
In some ways these are separate actions at different parts of the interest rate curve. Technically, the Fed can only impact short-term rates (credit cards, car loans, some business loans, bank/money market rates) and the Treasury is focused on longer-term rates (US Government borrowing, mortgage rates, longer-term business loans) and yet, the two ideally work together. If we think there is too much inflation, interest rates are increased to slow down borrowing, speculating, spending. Lowering rates can help decrease US Government interest costs, home purchases, business spending. So, what happens when they don’t agree? A bit of chaos and confusion, which is where we are. In short, the Fed is concerned about inflation over the last 4 years, and the bond market is concerned about the deficit, long-term inflation and is not buying Secretary Bessent’s strategy.
Where does that leave consumers and investors?
This is a good time for:
- Getting paid more on cash at the bank or in a high yield savings/money market…for now
- Paying down debt
- Buying shorter-term bonds that have less price sensitivity
- Buying individual bond “ladders” that will hold their price if you hold them to maturity and will be replaced by a new bond each year so if rates go up, you benefit. As yields go up, prices go down so this presents a bit of a continuing “buying opportunity”
This NOT a good time for:
- A lot of interest-sensitive debt
- A short-term Adjustable Rate Mortgage
- Buying a bond fund/ETF you don’t plan to keep for awhile
- Longer-term CDs- you want the chance to buy another one as rates may continue to go up
At this point, the debate will continue, most likely into 2027. As long as we have the war in Iran, tariffs and a focus on elections, there will be an ongoing debate about what it takes to get to lower inflation, whether the target should be increased, what to do about the US debt, etc… Keep in mind, the higher bond rates go, the more attractive bonds actually look vs. stocks. If I can get a lower-risk income or yield from a bond than I can get from a stock, why take the risk? And there is also the risk that higher rates slows down the economy (Warsh believe the US economy can handle it) which for now is being seen as a low risk. Stay tuned and feel free to reach out to us to discuss your own particular situation because this is definitely NOT a one-size-fits-all environment.