The month of September has been surprisingly quiet and relatively flat. That’s a relief given this month’s history of ugly selloffs. There appear to be early signs that Growth is starting to outperform Value, a ratio we watch closely for market context. It isn’t confirmed yet, but it wouldn’t take much for that relationship to put us back into growth mode.
One of the bigger headwinds holding back the market right now appears to be the price of crude oil futures moving back above $100. The spike peaked on September 15th, and looks to be calming back down below the $90 price level. We’ve seen the stock market struggle when that number gets too high, so seeing it back off has been a positive sign for the second half of the month.
The Federal Reserve raised the Fed Funds rate by 0.25% as expected, and signaled another rate increase of 0.25% would likely occur in the near term. This matches theTwo-Year Treasury Yield I’ve mentioned many times (thanks to Tom McClellan) and with the chart shown at the end of my September market commentary video.
Our guess is that we are not out of the woods just yet. We still have to get through the often spooky month of October and the midterm elections before the historically strong “best eight months” of the four-year presidential cycle typically begin.
This month’s chart compares the fed funds rate (the smoother line) with the 2-year U.S. Treasury yield (the choppier line). Even as the Fed has raised rates in line with the 2-year yield, that yield has kept moving further away. That suggests more than one additional hike may be needed unless the 2-year reverses course.
Ten-Year chart of the 2-Year US Treasury Yield compared to the Fed Funds Target Rate (Source: FastTrack.net)
Our Shadowridge Long-Term Trend indicator turned negative August 31st, having been positive since early April.
Our Mid-Term Cycle indicator leans negative, recently dipping below the range it has been in for a few months.
As of Wednesday night (September 23rd, 2026), our Shadowridge Dashboard showed Positive to Negative market sectors as 3 to 8. Technology, Communications, and Healthcare make up the positive sectors.
Only one of the Ten RGB Bond Indices are trending positive, above their 50-day Moving Average. The only positive bond sector is Floating Rate. I talk about that one often in our monthly webinar.
RGB Economic and Interest Rate Sensitive Bond sectors (Source: ShadowridgeData.com)
With the Federal Reserve raising rates again, the bond market looks even less interesting to us than it did earlier this year. Floating-rate is still the only bond sector in a positive trend, so in our view, there is little reason to stay diversified across the rest of the space. We believe that money market funds may be a better place to park cash or to stand in for a fixed-income allocation given current conditions.
Bottom line: The market is holding up relatively well given the underlying sector weakness and the NYSE advance-decline data we watch. This is still a tough stretch of the year, so more volatility would not be a surprise even though we have seen relatively little of it so far. We stay cautious until after the midterm elections. Historically, the odds of a stronger market begin to rise soon after that.
Stay safe out there!
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