Weekly Investment Update (09/18/2026)

U.S. equities remained relatively resilient this week despite several crosscurrents. Debate over the pace of AI development and regulation intensified, with Anthropic CEO Dario Amodei and other prominent AI leaders calling for a slower pace of frontier model development amid safety concerns. While we recognize these risks, our investment thesis is focused on the increasingly visible economic benefits of AI. For more thoughts, please read “Putting AI Fears in Perspective.”

At the same time, the Federal Reserve raised interest rates for the first time since July 2023. The framing of the Fed’s decision matters, with Chair Kevin Warsh citing a resilient economic backdrop, while also recognizing that inflation trends have not improved. With an additional rate hike expected in 2026, we still do not anticipate a prolonged hiking cycle that would derail economic activity or equity markets.

Beyond this, investors are navigating what has historically been a more challenging period for equities. September is typically the weakest month of the year for the S&P 500, reflecting several factors explained in more detail below. However, with economic and earnings growth remaining supportive, we continue to favor maintaining equity exposure and looking through short-term volatility rather than attempting to time seasonal market swings.

September FOMC: Assessing the Risk of a Hiking Cycle

What is happening: The Fed raised interest rates by 25 basis points to a target range of 3.75%-4.0%, officially ending its cutting cycle. The move was expected, as markets had increasingly priced in a hike following hotter-than-expected inflation and labor market data and Chair Warsh’s Jackson Hole speech in the weeks leading up to the meeting. The decision was also unanimous, in contrast to expectations for a few dissents, helping dispel concerns over Warsh’s ability to build consensus. The statement noted that the policy adjustment supported a “timelier” return to the Fed’s 2% inflation target and that domestic demand has been “resilient.” 

The updated Summary of Economic Projections revealed higher growth and inflation and lower unemployment forecasts than prior projections. The median dot in the dot plot suggested an additional hike this year, and an unchanged policy rate through the end of 2027. The longer-run fed funds forecast also rose to 3.2% from 3.1%, a nod to strong AI capex and productivity growth and a higher neutral rate. 

Chair Warsh’s press conference underscored that the economy was not only strong but appeared to be strengthening, while inflation trends had not meaningfully improved and commodity prices had risen. Against that backdrop, the committee widely shared the view that financial conditions were not restrictive. A “dose” of accommodation was therefore removed. 

Why it matters: The September meeting was more hawkish than expected for markets, with yields rising and the fixed income curve flattening on the day. Rates markets fully price another hike in December and about two more by the end of 2027. The question for investors is whether the Fed is embarking on an extended or aggressive hiking cycle. One-and-done hikes are rare, though one did occur under Chair Greenspan in 1997, a time when a strong productivity cycle was underway but inflation was at target. With the Fed already penciling in another hike before year end and Chair Warsh emphasizing economic resilience against a backdrop of elevated inflation and high commodity prices, a second hike looks plausible by December. As mentioned above, however, that move is fully priced. 

Beyond that, we remain more attentive to further repricing toward a more rapid or extended hike cycle. Market pricing as it currently stands is likely not enough to weigh on risk assets in the context of strong capex and domestic demand. We remain of the view that the incoming data is unlikely to justify additional or front-loaded hikes, as disinflationary forces remain intact. A key risk, however, is the path of commodity prices. 

Seasonal Swings Should Not Unsettle Long-Term Investment Plans

What is happening: Historically, September has been the weakest month of the year for stock market performance. From 1928 to 2025, the S&P 500 averaged a loss of 1.1% during September, finishing positively only 45% of the time. In contrast, the average return across all months since 1928 is 0.66%.

As with all seasonal patterns, performance varies. In September 2010, the S&P 500 gained 8.8%, the best month of that year, and September returns in 2012, 2013, 2017, and 2019 were also positive. Last year, the market rallied throughout September, finishing the month up 3.5%. Historically, when equity markets have been particularly weak in September, a strong rebound in October has often followed. The period from October through January is typically seasonally strong for the market, with average returns of 4% since 1928. 

The seasonal weakness reflects several recurring factors. Institutional investors typically rebalance portfolios in September ahead of year-end, while mutual funds sell losing investments to manage taxes before their fiscal year closes. Retail participation, buoyant during the summer, tends to slow. Corporate buybacks, an important pillar of equity demand over the past decade, tend to pause as firms enter blackout periods ahead of earnings announcements. At the same time, bond markets enter their busiest issuance window, prompting some investors to rotate out of equities to participate in new bond offerings.

Why it matters: While historical patterns and seasonal trends can inform short-term market expectations, relying on seasonality alone has not proven to be a successful long-term strategy. In the short term, equity markets are influenced by many factors beyond seasonal patterns, such as economic indicators, geopolitical events, and company-specific developments. Attempting to time markets solely based on seasonality can result in missed appreciation and unnecessary risk. Moreover, historical data has shown that timing the markets may lead to losses. 

We believe the most effective strategy for reaching long-term investment goals is to stay invested while adjusting portfolio positioning based on a thorough understanding of underlying economic and financial factors. Bessemer maintains an overweight position to equities relative to respective benchmarks and strong earnings growth continuing to support the S&P 500 in the short to medium term.