Markets
Weekly Market Update - September 21, 2026
By Jason Crumley | Alek Sawchuk, CFA | Sherwin Pasha, CFA 21 September 2026 5 min read
Equity Market Commentary
North American equity markets held roughly flat last week despite a US interest rate hike and warnings of further tightening. Consequently, the rate-sensitive utilities, financials, and real estate sectors led the declines in the S&P 500. Meanwhile, a critical Saudi oil pipeline bypassing the Strait of Hormuz was struck. Even with repairs expected to take weeks and US crude oil reserves near multi-decade lows, oil prices ended the week flat.
In coordinated statements last week, various AI leaders stressed that development should moderate and focus on safety. Anthropic and OpenAI executives urged slowing progress due to safety concerns—as advanced AI models have already shown signs of malicious intent. Sam Altman, CEO of OpenAI which created ChatGPT, stated the company will delay its initial public offering in an effort to focus on safety. This briefly dragged down companies like Nvidia, Micron, and Hewlett Packard Enterprise, though buyers quickly stepped in to erase those losses. Conversely, shares of cybersecurity leaders Palo Alto Networks and CrowdStrike jumped on anticipated spending to counter AI threats.
Corporate earnings highlighted a consumer stretched by the rise in the cost of living. Dollarama shares climbed 5.5% after reporting a 5.4% increase in same-store sales and raising its annual Canadian comparable sales forecast. Increased customer traffic revealed that elevated living costs and US-Canada trade tariff uncertainties are prompting budget-conscious shoppers to look for more affordable everyday products offered by the dollar store.
Canada secured nearly $500 billion in capital pledges at its inaugural Investment Summit, highlighted by a $50 billion CPP/Brookfield fund and $325 billion in bank financing. To accelerate business capital deployment, Prime Minister Mark Carney introduced a "Productivity Mega Deduction" that halves the effective corporate investment tax rate to 6.4%, alongside private operational concessions for Canada’s four largest airports to fund domestic infrastructure.
Escalating global trade tensions are forging unprecedented international alliances. The European Commission president proposed making Canada the EU’s first "associate member" to counter pressures from China and the US. Prime Minister Mark Carney welcomed the move, aiming to double non-US commerce over the next decade following last month's collapsed US-Canada trade talks. However, some EU diplomats questioned the lack of a legal framework for such flexible agreements.
As monetary policy tightens and energy costs rise, markets will monitor whether shifting international alliances and defensive consumer spending can cushion broader economic growth against persistent cost pressures.
Bond Market Commentary
Last week, short- to medium-term US Treasury bond prices declined and yields rose amidst volatile crude oil prices, mounting inflation concerns, and the Federal Reserve’s (Fed) 25-basis-point rate hike—its first increase since July 2023. This came alongside fresh UK inflation data and key rate decisions from the Bank of England (BoE) and the Bank of Japan (BoJ). Meanwhile, the 10-year US Treasury yield briefly broke above 5% for the first time since 2007, while Canadian bonds rallied.
The Fed raised the benchmark federal funds rate by 25 basis points to a target range of 3.75% to 4.00% following a unanimous vote by the Federal Open Market Committee. Fed Chair Kevin Warsh stated that officials find it difficult to describe current financial conditions as restrictive, highlighting numerous product and service categories showing annualized price gains above 3% on both a 6- and 12-month basis. Reinforcing this hawkish tone, 16 of 18 officials projected at least one additional rate hike by the end of 2026. Overall, bond investors largely viewed the decision, updated projections, and Chair Warsh’s messaging as a credible demonstration of Fed independence to take whatever steps necessary to return inflation to its 2% target.
In the UK, headline CPI inflation rose to 3.1% year-over-year—matching consensus expectations but exceeding the BoE’s July Monetary Policy Report projection of 2.8%, driven largely by fuel and airfare prices. The BoE held rates at 3.75%, with Governor Andrew Bailey flagging upside risks from energy prices while noting that the impact to wages and prices remain subdued for now. In Japan, the BoJ raised rates by 25 basis points to 1.25%, its highest level in roughly 31 years. Governor Kazuo Ueda noted that with the price trend now very close to the 2% target, the BoJ may need to act preemptively to prevent inflation from overshooting.
The 10-year US Treasury yield crossed the key psychological and technical 5% threshold, while closing the week three basis points higher at 5%. The surge in long-term global bond yields is driven by a complex interplay of macroeconomic, geopolitical, and market-specific factors and investors are demanding a higher investment yield for locking in their money. In contrast, Canadian bond prices rose across the curve, yields declined, as the core (excluding food and energy) consumer price index (CPI) inflation report tracked close to the 2% BoC target, and investors contemplated whether swap market rate hike expectations may be overstretched. In response, the implied probability of a rate hike by the BoC at the October meeting declined from 77% to 61%. The 10-year Canadian treasury yield declined six basis points to 3.88%.
Chart of the week
With the 10-year US Treasury yield closing at 5% last week, the hurdle rate for taking on equity risk has materially changed. This week’s chart compares the 10-year Treasury yield with the S&P 500’s forward earnings yield—the inverse of its P/E ratio. The earnings yield shows investors the proportion of earnings relative to the company's stock price. As the earnings yield and the yield on 10-year yields have converged, the additional earnings yield investors receive for taking on equity risk has narrowed, changing the trade-off after years of low government bond yields pushed investors to look for higher returns.
This is particularly relevant amid the AI investment cycle, where significant capital spending is weighing on near-term free cash flow for some hyperscalers in pursuit of future growth
This changing backdrop reinforces the importance of evaluating opportunities across the full risk-return spectrum. With meaningful yields available from high-quality fixed income, investors have a stronger alternative against which to assess riskier opportunities. Ultimately, the question is whether future growth and returns on invested capital provide sufficient compensation for taking on that additional risk.
The Week Ahead
Wednesday: US S&P Global composite PMI, General Mills earnings
Thursday: US current account balance, Cdn retail sales, Costco earnings
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