September brought broad weakness across financial markets as persistent inflation, the war in Iran and the Federal Reserve’s 25-basis-point rate hike drove Treasury yields sharply higher and pressured both stocks and bonds.
U.S. and international equities generally moved lower, with smaller companies and developed non-U.S. markets under greater pressure. Emerging markets were more resilient, while commodities were the only major asset class to advance.
The AI capital-spending cycle remains a meaningful source of economic and earnings momentum, but depleted free cash flow is pushing more companies toward debt financing and increasing scrutiny of leverage, borrowing costs and the durability of future returns.
The Fed faces an unusually difficult policy backdrop: AI infrastructure spending may remain relatively insensitive to modest changes in borrowing costs, while geopolitical instability and higher energy prices are adding inflationary pressure that tighter financial conditions cannot directly resolve.
Basis Points