Hello, I’m JP Powers, Chief Investment Officer at RWA Wealth Partners.

Thanks for joining me for our September market update.

This month has really been defined by three things: a surge in oil prices, a bond market under intense pressure, and an equity market that’s remained surprisingly resilient despite both. At first glance, those may seem like separate stories, but they’re actually connected by a common theme: the return of inflation concerns.

Rising energy prices pushed those concerns back into focus. Bond markets reacted quickly, and equities spent the month trying to look through it. We’ll walk through those three areas and what they may mean as we head into the fourth quarter.

Let’s start with where the story began: the energy markets.

Looking at crude oil this year, we did see some relief earlier this summer as the conflict with Iran looked headed toward a resolution. But you can see that prices have been trending higher since that time, and September brought a notable acceleration. Brent crude is sitting at roughly $105 a barrel today.

As a result, commodities have been the best-performing major asset class this month, up about 2%, well ahead of almost everything else in investor portfolios. The catalyst was, of course, geopolitical. Comments out of Iran this month raised concerns that the regional conflict could expand toward the Indian Ocean, putting renewed focus on the Strait of Hormuz and the broader question of global energy supply.

Whether those disruptions ultimately materialize is almost secondary. Markets tend to reprice risk before events occur, and that’s exactly what we saw this month.

It’s not just oil, either. European natural gas prices have moved higher on supply concerns as well, creating pressure across the broader energy complex.

Higher energy prices matter far beyond the energy sector, of course. They affect transportation costs, manufacturing and packaging costs, consumer spending, and, perhaps most importantly, inflation expectations. That’s what makes oil a broader market story this month as well.

The question investors immediately began asking wasn’t simply whether oil could go higher. The question was what higher energy prices might mean for inflation and interest rates.

That brings us directly to the bond market.

The clearest market response showed up in fixed income. Looking at the 30-year Treasury yield, what’s notable isn’t simply where yields are today. It’s the steady repricing we’ve seen over the last several quarters, culminating in this month’s move to approximately 5.5%, the highest level in more than 20 years.

Higher oil prices are certainly part of this, but they’re not the entire story. The Fed raised rates this month for the first time in three years, bringing the target range to 3.75% to 4%. More importantly, several Fed officials suggested that additional tightening could still be on the table this year.

The result has been significant pressure on long-duration fixed income. Bonds have been the worst-performing major asset class in September, with the Bloomberg Aggregate Bond Index down roughly 1.4% this month.

But the more interesting question heading into the fourth quarter is what’s actually driving long-term yields higher. If this is primarily a repricing of future Fed policy, that’s one thing. But if investors are beginning to demand additional compensation for inflation risk, persistent deficits, and elevated Treasury issuance, then we’re discussing something more structural.

One of those is cyclical. The other could prove much more persistent. That distinction matters because it influences how investors think about both fixed income and equity valuations going forward.

Given higher oil prices and higher long-term rates, you might expect equities to be under significant pressure. Instead, that story has been more nuanced as well.

Looking at the S&P 500, what’s notable is not exceptional strength, but resilience. Despite a challenging backdrop of higher energy prices and rising bond yields, equities have largely managed to hold their ground, at least for now.

Investors appear willing to look through near-term macro concerns and remain focused on earnings growth and economic fundamentals. As we’ve covered in this space recently, that earnings growth has certainly been there to support these levels this year.

The market’s reaction this month suggests investors still believe the economy and corporate earnings can withstand this higher-rate environment. But we want to differentiate between an index like the S&P holding near all-time highs because of just a few sectors performing well and a broad-based rally driven by a strengthening economic picture.

Sector performance this month doesn’t lend much support to the latter scenario, but it does provide some insight into how investors are positioning.

Technology has been the strongest-performing sector in the S&P 500 this month, up more than 5% now. That’s somewhat surprising given the move higher in interest rates, which traditionally can create headwinds for growth-oriented companies. Instead, investors continue to reward businesses with strong earnings profiles and durable growth expectations, mainly around the AI theme.

On the other hand, energy stocks have actually lagged the move in crude oil prices. That suggests investors may be weighing the benefits of higher energy prices against concerns about economic growth and potential demand destruction.

What this tells us is that investors remain selective rather than broadly bullish. Leadership remains pretty concentrated in areas where earnings expectations continue to justify premium valuations.

As we close out this quarter and move into another earnings season, that leadership will be tested.

If I had to summarize September in a single simple chart, it would be this one: commodities were the strongest-performing major asset class, bonds were the weakest, and global equities finished somewhere in between, showing far more resilience than many investors might have expected given the moves we saw in both energy and interest rates.

Taken together, these results show that markets spent September repricing inflation risk.

Looking ahead, it’s tempting to think about the upcoming elections impacting markets, but we’ll be watching three other items closely: energy prices, long-term Treasury yields, and corporate earnings.

Those three will tell us whether September was simply a temporary repricing event or the beginning of a more durable shift in expectations.

And of course, all of this could change with a peace deal with Iran.

As always, thank you for watching, and we’ll see you next month.