F.N.B. Wealth Management Fast Five

1. What happened in markets during September?

September marked a reversal from previous months, where value had generally outperformed growth.  Despite headwinds of higher oil prices, higher yields and tighter monetary policy, the AI narrative, software and semiconductor spending helped prop up the indices with the heaviest technology exposure.

• U.S. equities were slightly down in September (S&P500, -0.35%) as they wrestled with surging bond yields and a rate hike from the Federal Reserve. The tech-heavy NASDAQ finished with a return of +1.93%, while the DJIA slid -4.1%.  
• Growth stocks materially outperformed value stocks, as large-cap companies, particularly AI beneficiaries, benefited from strong earnings momentum and investor demand despite high oil prices and high interest rates. September saw a strong recovery in the enthusiasm for the AI trade, as value-oriented sectors, such as Utilities, Real Estate and Financial, faced headwinds as long-term Treasury yields moved higher. Market breadth deteriorated as investors crowded into the mega-cap names that masked much of the volatility experienced in September. 
• International indices struggled, particularly those that did not have strong AI exposure. Developed international markets, MSCI EAFE, finished the month at -3.3%, while emerging markets only had a small loss, with MSCI EM -0.65%. Mid-cap companies, as measured by the S&P400, returned -4.2% while small-cap companies, as measured by the Russell 2000, sold off -5.3%. These indices have higher exposures to value sectors. 
• The U.S. government bond yield curve modestly steepened as long-term yields rose more than short-term yields, despite the Federal Reserve’s rate hike and expectations of tighter monetary policy.  The 2-year Treasury ended the month at 4.9%, while the 10-year Treasury ended the month at 5.3%.
• Bond indices posted losses as renewed concerns over inflation, fiscal deficit concerns and expectations of tighter monetary policy pushed U.S. 10-year yields their highest levels since 2007. 
• Energy prices rallied due to geopolitical risk and higher inflation readings. While a stronger dollar and rising interest rates pressured many commodity sectors, energy was a clear exception, with crude oil and refined products among the strongest performers. Brent oil gained 10.8%, while WTI gained about 7.6% during September. Outside energy, commodities struggled and precious metals sold off. Gold fell 9% and silver fell 11%. 
• The U.S. dollar strengthened in September relative to other currencies, with the U.S. Dollar Index (DXY) ending the month at 101.45. The dollar moved from 100 after the Fed announced it was hiking interest rates on September 16 and the market priced in an additional two rate hikes. 

2. What were the takeaways from the Fed’s September meeting and rate decision?

The Federal Open Market Committee (FOMC) showed they were serious about getting inflation under control, unanimously voting to raise its Fed Funds Target Rate by 25 bps or ¼ of a percent for the first time in three years at the September meeting. Here is what caught our attention:

• The unification of the Committee was a statement in and of itself, given the contentious 9-3 split vote during the July meeting. Inflation during the summer months clearly reached a level where monetary policy action was needed. 
• The Committee declared that the “policy action will support a timelier return to the Committee’s 2% goal.” 
• Chairman Warsh referred to it as “taking a dose of accommodation away” while productivity growth is strong, capital investment is robust and job gains have kept pace with changes in the workforce.
• Within the Summary of Economic Projections (SEP), 16 of the policymakers saw the possibility of at least one more rate increase this year (it was six in June).
• There is also no guarantee that the Fed won’t raise rates in October; the Fed has raised rates prior to elections in 1994, 2004, 2018 and 2022.
• Of course, the Fed was not alone in its decision to raise rates, the European Central Bank and the Bank of Japan also chose to raise their rates in September, although the Bank of England held their rate steady.
  
   

3. How bad was the 3rd quarter for global bonds?

Global bonds had their worst quarter since 2024, due to inflation and deficit sustainability concerns, while the 10-year Treasury had its worst quarter since 1994. Other notable bond market statistics for the quarter were:

• U.S. 10-year and 30-year Treasury yields both hit their highest levels since 2002.
• U.K. 30-year gilts hit 6% for the first time since 1998. French 10-year yields reached 4.8%, the highest level since the establishment of the euro in 1999. Furthermore, the spread between French and German bonds is at the widest margin since 2012.
• The average yield on government debt worldwide is at its highest level since 2000 (4.04%), and the average U.S. Treasury yield on $32 trillion of outstanding debt is 5.10% (just shy of 2023’s high of 5.12%). 
• The Institute of International Finance (IIF) warned that elevated interest costs are putting a significant strain on developed nations and specifically called out the U.S., U.K., France and Japan, saying they face “persistently large deficits and rising interest expenses, challenges long associated with debt-distressed emerging market sovereigns.” The IIF noted that global debt has now surpassed $365 trillion.
  
   

4. What were the key economic data points reported in September?  

September was full of impactful economic reports that are likely to shape future policy decisions. Here are the ones that had the biggest impact on financial markets:

• The Personal Consumption Expenditures Index (PCE), the Fed’s preferred inflation measure, came in at +0.3% m/m in August (in line with expectations) and +3.4% y/y (vs. expectations of +3.7% y/y). Core PCE (ex-food and energy) was +0.2% m/m and +3.0% y/y; both were less-than-expectations.
• Inflation-adjusted personal spending rose +0.6% m/m (July was +0.1%), while nominal spending was +0.9% m/m. That is the fastest pace since March 2025.
• The Conference Board’s Consumer Confidence Index dropped to the lowest level since 2014, 81.9 in September for a drop of 6.7 points. Driving the decline was the current conditions portion of the index, dropping 8 points on respondents’ concerns over the current cost of living/affordability.
• The second quarter GDP was revised up to +2.2% annualized (seasonally adjusted) from the previous reading of +1.5%. The biggest revisions came from upward revisions in investments, consumer spending and government outlays.
• U.S. retail sales for August came in much stronger than expected at +1.2% m/m (expectations were for +0.8%). Of course, gas prices added 0.25%, while auto sales added 0.11%.
  
   

5. What is the Chief Investment Office monitoring in October?

Headline sensitivity and market volatility are likely to be consistent themes as we head into Q4. Here is what we are watching for in October:

1. The Federal Reserve meeting being held October 28 is still considered a “live” meeting, meaning a rate decision could come at that meeting, and we will be watching to see if the Fed gets more aggressive in their tightening.
2. U.S. midterm elections will drive headline risks throughout October, but we won’t speculate on the outcomes. We will, however, be monitoring financial markets and their interpretation of the results.
3. Third quarter earnings will be reported during the second half of October and expectations are high. We will be watching to see how corporations did in Q3 and listening for any potential guidance on future quarters.
   
    

Charts of the Month

Slippery Inflation

Inflation this year has been slippery for a reason…it has had very expensive oil dumped all over it. The war in Iran continues to constrict the movement of global oil supplies through the Strait of Hormuz, and the escalation of hostilities during September did not help the global price of oil as Brent Crude traded above $100/barrel during the month. Collateral effects are starting to show up around the world. Here in the U.S., gasoline inventories hit their lowest level in 12 years, at 204 million barrels, and U.S. diesel prices hit a record high during September. Of course, the U.S. is in a much different position than it was in during the 1970’s. Today, the U.S. has one of the world's largest refining industries and is currently processing the most crude ever, at roughly 17 million barrels per day. Nevertheless, bringing fuel costs down from current levels is critically important for the global economy.

U.S. Gasoline Stockpiles

Trade Conflict Continues on Multiple Fronts

September had some key developments in the U.S. trade policy. Perhaps the most notable was the ongoing battle between the U.S. and Canada seemed to reach a tipping point, as the U.S. administration on September 29 imposed an import ban on motorcycles, alcohol products and a collection of commodity imports, including whey products. This impacts roughly $1 billion in goods (U.S. and Canada traded more than $900 billion worth of goods in 2025). Of course, this is in addition to the 50% tariffs placed on Canadian imports for certain cheese products, golf carts, boats and furniture. Canada responded by raising tariffs on hundreds of U.S. products between 15% and 50%. U.S. steel was one of the most impacted goods, as the Canadian tariff went from 25% to 50%.

U.S. and China trade relations were also in the headlines, as President Xi Jinping of China made his first state visit since 2015 in September. Unfortunately, the summit between the two countries concluded without many new developments. 

U.S. Trade Balance