CWS Market Review – September 1, 2026

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Welcome to the Late 2020s!

Yesterday, the month of August came to a close, and it was a decent one for Wall Street. The S&P 500 gained 2.6% for the month, which isn’t so bad for a monthly return.

The problem for us now is that we’re in September. Although September is one of my favorite months (football, sweaters!), it’s been a terrible month for investors. Over the last century, September has been, on average, the worst month for stocks. In fact, it’s the worst for stocks by far.

Since 1928, the S&P 500 has averaged a loss of 1.17% during September. Not only that, but October is pretty bad as well. It’s been the fourth-worst month for stocks. September and October have historically combined to give investors an unwelcomed one-two punch.

Not only did the month of August come to an end yesterday, but we’re just over two-thirds of the way through the 2020s. In fact, you could say that we’re now into the late 2020s. So far, the S&P 500 is up 137.9% this decade. With dividends, the S&P 500 is 162.8% for the decade so far.

Historically, later in the decade has been much better for investors. In fact, the market has averaged a small loss over the first quarter of each decade. After the first 80 months of a decade, where we are now, the S&P 500 has gained 87.6%. But over the final third of a decade, the S&P 500 has posted an average gain of 62.1%. That’s not bad considering the final third is only half as much time as the first two-thirds of a decade.

This has also been a traditionally tough time for stocks during the presidential election cycle. Historically, the mid-term year has been lousy for stocks, but the market turns toward the bulls during the final quarter of the mid-term year. After that, it’s been a sharp 30% bull run until the middle of the pre-election year.

Stocks and Bonds Part Ways

To be clear, I don’t put a lot of faith in these calendar effects, although I do find them interesting. For example, the stock market’s entire gain has come over the last few and first few days of each month. The middle of the month is pretty much flat.

I do have a concern lately in that the stock and bond markets seem to have parted ways. As a very general rule of thumb, the bond market tends to lead the stock market by several months. Several bear markets have been preceded by sharp downturns in bond prices. It makes sense if you view it as investors dumping safer assets and chasing riskier assets.

Here’s a chart of the S&P 500 ETF (SPY) and the Long-Term Treasury Bonds ETF (TLT):

Notice how bond prices have turned down over the last six months even as stock prices have soared. It’s the big divergence that grabs my attention. The stock market last closed at a new high on August 13. Since then, it hasn’t done much. Today, the S&P 500 fell for the third day in a row. Lately, value stocks have resumed leading the market. I suspect that’s going to last.

Higher bonds can easily harm economic growth. In fact, mortgage rates are at a 14-month high. The average rate on the 30-year fixed mortgage is now 6.87%. Those higher borrowing costs radiate out across the entire housing industry.

It’s not just here; bond prices around the world have fallen lower. In Japan and Britain, yields surged to multi-decade highs. The 30-year British Treasury is close to a 28-year high.

Tech stocks have been acting a little better lately, though they’re still well below the relative strength high we saw in early June. There’s still a lot of uncertainty as the U.S. has launched more strikes against Iran and oil prices have climbed higher. Now we’ve learned that interest rates may soon be rising again.

What Happened at the Fed’s Jackson Hole Meeting

The Federal Reserve held its annual get-together at Jackson Hole, WY over the weekend. Fed Chairman Kevin Warsh spoke on Friday, and he sounded a hawkish note.

Warsh said the Fed has more work to do to bring inflation in line with the Fed’s target. He also cautioned that there are some signs that the markets see possible risks in the near future. Investors are clearly worried about excess valuations and slower growth.

There are a few items that Warsh mentioned that I want to highlight for you. First is that Warsh tried to avoid saying anything that could be construed as guidance. That’s good to hear and it gets rid of a silly guessing game on Wall Street.

Specifically, Warsh said, “We should not indulge a regime in which market participants are looking primarily to the Fed for their next trade.” That’s very good to hear. Warsh said:

Forward guidance as a regular practice was adopted by my colleagues and me during the Global Financial Crisis. It was essential at the time, and we introduced it with much fanfare. But, as with other legacies of crises past, I believe that the practice has overstayed its welcome.

Instead, Warsh said he wanted to give his broad overview of where the U.S. economy is right now. Warsh acknowledged that the inflation picture has gotten better, but — and this is the key — he still isn’t convinced that the underlying trends have improved.

Warsh pointed out that over the last six months, 49% of the goods and services in the PCE showed annual price increases of more than 3% which is, in Warsh’s words, “still quite elevated.”

Warsh essentially declared war on inflation, and the jobs market will take the backseat.

In the trading pits, futures traders pushed up the odds of a rate hike later this month. A week ago, traders said the odds were just 43% that the Fed would hike in September.

After Jackson Hole, the odds shot up to 68%. The next Fed meeting is on September 16. Traders also see a rate hike coming at the December meeting. I’m not convinced about that just yet, but I was surprised by the defiant attitude from the Fed chairman. He makes it clear what his agenda is.

In June, I told you about the very good earnings report from Science Applications International (SAIC). This is a wonderful company. I’ve described it as the IT helpdesk for the Pentagon.

I’ll cover the stock in more detail in our premium issue, but I wanted to share some impressive numbers with you.

For its fiscal Q1 (ending May 1), SAIC made $3.23 per share. That was 41% above Wall Street’s forecast of $2.28 per share. SAIC also raised its full-year earnings range from $9.50 to $9.70 per share, to $9.90 to $10.10 per share.

Last week, SAIC reported earnings again, and again, it flattened Wall Street’s estimates. For its fiscal Q2, SAIC made $3.01 per share. The consensus on Wall Street had been for $2.31 per share.

The company raised its full-year guidance again. SAIC now sees full year earnings ranging between $10.65 and $10.75 per share. Over the last seven months, SAIC has gained more than 55% for us.

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That’s all for now. The stock market will be closed next Monday for Labor Day. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on September 1st, 2026 at 6:02 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.