September 2026: Tomoro Market & Portfolio Update

Insights

This Month’s Key Takeaways

U.S. markets advanced in August as strong corporate earnings and continued enthusiasm around AI supported equities, while elevated Treasury yields, inflation concerns, and geopolitical uncertainty contributed to periods of volatility.

Key takeaways:

• U.S. equities posted strong gains in August. The S&P 500 rose 2.6%, while the Nasdaq gained 3.9% as technology and AI-related stocks regained momentum.
• Investor enthusiasm around AI remained an important market driver. Strong corporate earnings and expectations for continued investment in AI infrastructure supported technology stocks, although elevated valuations and the scale of ongoing AI investment remain areas investors are watching closely. Small cap stocks also outperformed amidst encouraging global economic data.
• Treasury yields moved higher during the month. The 10-year Treasury yield ended August near 4.75%, while the 30-year yield reached approximately 5.25%. Higher yields continued to create a headwind for longer duration assets, while also increasing the income potential available from high quality fixed income.
• Market leadership broadened during the month. Energy was among the strongest-performing areas of the market, while materials and gold-related investments also benefited from commodity strength and geopolitical uncertainty.
• The outlook for monetary policy became more uncertain. Fed commentary at Jackson Hole emphasized continued attention to inflation and contributed to increased expectations for a potential change in interest rate policy. As of September 16, the Federal Reserve raised rates by 25 basis points, bringing the target range from 3.75% to 4.00%.

Our perspective: We continue to believe portfolios should remain disciplined and diversified, combining exposure to long-term growth opportunities with high-quality diversifying assets, including fixed income. With interest rates still elevated and the Federal Reserve signaling a continued focus on inflation through its recent interest rate hike, investors should remain mindful of duration and interest rate risk while also recognizing that higher yields have improved the income potential available across fixed income. In this environment, we believe a balanced approach and appropriate diversification can help portfolios navigate a range of market outcomes. Our focus remains on long-term objectives rather than reacting to short-term market movements.

What this means for your portfolio?

• August’s market environment reinforces the importance of staying diversified and disciplined. Strong equity gains were encouraging, but leadership shifts, elevated Treasury yields, inflation concerns, and geopolitical uncertainty all contributed to periods of volatility.
• Strong corporate earnings and AI-related momentum remain important supports for equities, but we believe it is important to avoid allowing any single theme, sector, or group of stocks to dominate portfolio positioning.
• Higher Treasury yields continue to create both challenges and opportunities. While elevated rates can pressure equity valuations and longer duration assets, they also improve the income potential available from high quality fixed income.
• Broader market leadership is constructive for diversified portfolios. Exposure across sectors, styles, and market capitalizations can help reduce reliance on large cap technology while still allowing participation in long term growth opportunities.
• Our approach remains centered on discipline: maintaining appropriate diversification, rebalancing when allocations drift, and keeping portfolios aligned with each client’s long term objectives rather than reacting to short term market movements.

Biggest Headlines this month

Client question of the month

What does the Federal Reserve’s interest rate hike mean for me?

• A rate hike generally means borrowing costs may remain higher for longer. This can affect variable rate debt, new loans, mortgages, and business financing, making it important to review cash flow needs and upcoming borrowing decisions.
• For savers and income-focused investors, higher rates can be beneficial because cash, money market funds, CDs, Treasuries, and high-quality bonds may offer more attractive yields than they did for much of the past decade.
• For investors, higher rates can create both opportunities and risks. Bond income is more compelling, but existing bond prices can remain sensitive to further rate changes. Equity valuations may also face pressure, particularly in areas of the market where expectations are already high.
• The key takeaway is that a Fed rate hike does not require an immediate portfolio overhaul. It reinforces the importance of maintaining a diversified allocation, holding appropriate liquidity, being thoughtful about duration in fixed income, and keeping investment decisions aligned with your long-term goals rather than reacting to a single policy move.

Market Overview

Equities

• Market Review: U.S. equities advanced in August as strong second quarter earnings and continued enthusiasm around AI-related investment supported risk assets. Global equities rebounded after July’s sell-off, with broad earnings strength extending beyond technology. Higher interest rates do not automatically derail stocks when earnings growth and investment spending remain supportive. Even so, elevated valuations, concentration in large cap growth, and sensitivity to AI-related expectations leave markets vulnerable to volatility. 

Fixed Income

• Market Review: Fixed income markets remained highly sensitive to inflation data, fiscal concerns, Treasury supply, and Federal Reserve expectations. Yields moved higher across the fixed income universe during August, particularly on the intermediate and long end of the curve, creating both price pressure and more attractive income opportunities. Higher rates have been driven more by rising real yields than a sharp increase in inflation expectations, with resilient growth and elevated issuance keeping upward pressure on rates. 

Alternatives

• Market Review: Alternatives remained relevant in August as commodity strength, geopolitical uncertainty, and higher long term yields influenced market leadership. Energy prices and geopolitical tensions continued to weigh on long term yields. Gold and other defensive or real asset exposures also benefited at times as investors sought diversification amid inflation and policy uncertainty. 

Chart of the month

What does this chart mean?

• Inflation quietly reduces the purchasing power of your money over time. As the chart illustrates, even a relatively modest 3% annual inflation rate would reduce the purchasing power of $100,000 to roughly $55,000 over 20 years.
• The important point is that inflation compounds just like investment returns do but in the opposite direction. While your account balance may remain unchanged, the amount of goods and services that balance can purchase declines over time.
• For long term investors, the goal isn’t simply to preserve the number of dollars in an account; it is to preserve and grow purchasing power over time.
• The solution to inflation isn’t necessarily to chase a higher rate of return. Instead, investors can build portfolios designed to generate returns that have historically exceeded inflation over longer periods while remaining consistent with their risk tolerance and time horizon.