Market commentary: September 2026

Markets do not like uncertainty, and August offered plenty of it. The month opened with hopes of a deal to reopen the Strait of Hormuz and closed with US and Iranian forces exchanging fire again, oil back above $90 a barrel and shipping through the Strait still at a fraction of normal levels. Chip stocks lurched from a seven-day losing run for Nvidia to a set of results strong enough to reset the story once more.

Closer to home, the new Chancellor has set a date for his first Budget, inflation has ticked up, and the Bank of England is waiting to see how things develop before moving on rates. With the Federal Reserve, the European Central Bank and the Bank of England all meeting in the first half of September, and the Bank of Japan reportedly weighing its own move, it is a month for patience rather than reaction.

United Kingdom

A Budget date, and a familiar warning

The Chancellor of the Exchequer, John Healey, has chosen 28 October 2026 for his first Autumn Budget. He has said it will be built on fiscal discipline and on moving money and decision-making out of Westminster and into local areas. It is likely to set the tone for Prime Minister Andy Burnham’s government and its priorities.

The people at the top have changed, but many of the economic and fiscal pressures that faced the previous Chancellor have not. One lesson from last year has clearly been learned: the 2025 Budget was set unusually late, in November, and the long run-up produced months of press speculation and, for some people, financial decisions they later regretted. This year’s earlier date should shorten that window, but it will not close it. Speculation about council tax, the personal allowance and other reforms is already circulating, and the gilt market remains watchful.

Our advice is the same as it was last year. Please do not act on media speculation about what the Budget might contain. If anything you read causes you concern, talk to us first. The cost of a hasty decision made on a rumour can be far higher than the cost of waiting a few weeks for the facts.

Inflation and interest rates

Figures released on 19 August showed CPI inflation at 2.9 per cent in the year to July, up from 2.6 per cent in June and the first rise in the annual rate since March. The main driver was a 13 per cent increase in Ofgem’s energy price cap, which fed through into a 14.7 per cent jump in gas prices. The Chancellor pointed to the continuing effect of the conflict in the Middle East as the principal cause.

Employment remains a month-to-month concern, particularly for younger people. In the second quarter of 2026 the employment rate was highest among 35 to 49 year olds, at 84.5 per cent. Around 13.3 per cent of over 65s were in work, while the rate for 16 to 24 year olds was 50.7 per cent, one of the lowest recorded for that age group.

Andrew Bailey, Governor of the Bank of England, voted to hold rates in late July and used the Jackson Hole symposium to strike a wait-and-see tone, noting subdued second-round effects and a labour market that has been softening for some time. At month end, markets were pricing only a modest chance of a rate rise at the Bank’s 17 September meeting, with most of any expected tightening pushed out to December and February 2027.

United States

Chip stocks and AI valuations

US equities spent much of August digesting July’s sell-off in chip stocks. Volatility returned in the third week after reports that some of Nvidia’s largest customers had been told to expect price increases of more than 15 per cent on its next generation of servers. The shares fell for seven sessions in a row, their longest losing run since 2022.

That reversed sharply after Nvidia’s second-quarter results on 26 August. Revenue of $96.2 billion, up 106 per cent on a year earlier, and earnings of $2.22 a share comfortably beat expectations, and the company forecast 70 per cent revenue growth for its 2028 financial year against the roughly 44 per cent analysts had expected. The shares rose more than 7 per cent overnight, lifting both the Nasdaq and the S&P 500, helped by Amazon Web Services confirming an order for two million Nvidia processors.

The episode illustrates two things at once: the enormous underlying demand for AI infrastructure, and a market whose expectations are now so high that anything short of an exceptional quarter is punished. For a diversified long-term investor, that is an argument for balance rather than for chasing the story in either direction.

The Federal Reserve

Kevin Warsh gave his first Jackson Hole address as Chair of the Federal Reserve on 28 August, having offered little forward guidance since succeeding Jerome Powell in May. His tone was firm. He said inflation remained the Fed’s biggest problem, that the summer’s price data did not show a meaningful improvement in underlying trends, and that markets should not expect the Fed to signal its next move in advance. With CPI at 3.4 per cent and the Fed’s preferred measure closer to 3.7 per cent for the year to July, investors took this as a sign that a rate rise is firmly back on the table. The next meeting is on 15 and 16 September.

The Strait of Hormuz

Early August brought real optimism, with the US, Iran and Oman close to a temporary arrangement to restore shipping and the US Treasury Secretary suggesting a deal could come within days. Brent crude fell more than 5 per cent to around $79.50 a barrel on the news.

The talks dragged on without agreement, and shipping through the Strait remained at a fraction of pre-war levels. Iran continued to insist the Strait was effectively closed and under its control; the US maintained its naval blockade. The pause broke at the end of the month when US forces struck Iranian rocket launchers on Larak Island that had reportedly been preparing sea mines, and Iran responded with strikes on US-linked targets in Jordan and the UAE. Brent moved back above $90, reversing much of the previous week’s fall. It is a pattern that has repeated each month this year.

Europe

The European Central Bank held no scheduled meeting in August, leaving July’s settings in place: a deposit rate of 2.25 per cent and the other two key rates unchanged following June’s increase.

At Jackson Hole, Governing Council member Martin Kocher was more upbeat than markets had expected, saying the euro area economy was showing more momentum than many had assumed, while stressing continued alertness on inflation. The European Commission’s monthly survey showed economic confidence at a seven-month high. His colleague Primoz Dolenc suggested that the region’s resilience, combined with the conflict in the Middle East, pointed to a rate rise in September. Christine Lagarde was a notable absentee.

Flash figures suggest eurozone inflation rose to 3.3 per cent in August from 2.9 per cent in July, and markets are now pricing a 0.25 percentage point increase in the deposit rate to 2.5 per cent.

Far East

China

China’s slowdown extended into the third quarter. Data released on 17 August showed industrial production growth easing to 4.5 per cent year on year, below the 4.8 per cent forecast, while retail sales grew just 0.6 per cent against expectations of 1.5 per cent, the weakest pace since the depths of last year. Urban fixed-asset investment contracted 6.7 per cent for the year to date and urban unemployment edged up to 5.2 per cent.

Officials pointed in part to three typhoons that forced millions of people to relocate across the eastern and southern manufacturing regions. That compounded the longer-standing problem of weak domestic demand and renewed calls for China to accelerate its shift towards new sources of growth. Month-end manufacturing data offered a slightly brighter note: the official PMI came in at 49.8 for August, still in contraction for a second month but better than forecast and up from 49.2 in July, with new export orders recovering to just above 50.

Japan

The Bank of Japan continued to signal a move towards tighter policy, with reports through August suggesting a possible rate rise as early as its September meeting and a faster pace thereafter than markets had priced. Ten-year government bond yields reached multi-decade highs. Japanese equities were choppy, with a weaker yen supporting exporters even as rising rate expectations weighed on valuations.

Emerging markets

South Korea’s KOSPI had one of its wildest months on record. Having fallen sharply into late July on the same chip-valuation nerves that hit Wall Street, the index staged a dramatic recovery, including a 22 per cent rally over ten days, as optimism about the AI trade returned.

The El Niño risk flagged in July remains live, if slightly less alarming in the near term. The World Meteorological Organization and the US agency NOAA continue to put the probability of El Niño conditions persisting from August to November at close to or above 90 per cent, with a meaningful chance of a very strong event later in the year. Some emerging economies, India among them, are especially exposed to the drought that can follow. India’s mid-August update pointed to near-normal rainfall nationally in the short term, easing immediate concern about this year’s monsoon, though the medium-term risk to crop yields and food prices remains on watchlists across South Asia, East and Southern Africa and parts of Latin America.

What this means for you

None of the themes above is new, and that is rather the point. Geopolitical shocks, inflation that will not quite settle, and a technology sector priced for perfection have been the backdrop for most of this year. A well-diversified portfolio built around your own objectives and timescale is designed to weather exactly this kind of environment, and the evidence continues to show that staying invested through periods of noise serves long-term investors far better than trying to time them.

The one area where we would ask for particular care is the Autumn Budget. Between now and 28 October there will be a great deal written about what might change. Very little of it will be right. If you are considering any decision in response to something you have read, please speak to us first.

About the author

Matthew Steiner is co-founder and Managing Director of Aetas Wealth, with more than twenty years in financial services. He writes the firm’s monthly market commentary for clients, with the aim of explaining what is happening in plain English and helping families keep a long-term perspective through short-term noise.

If anything in this commentary, or in the run-up to the Budget on 28 October, raises a question about your own plans, a conversation with the Aetas Wealth team is the right first step. We would much rather talk it through than see a decision made on speculation. Talk to us before the Autumn Budget.

Official sources

The figures in this commentary draw on official statistics and central bank publications, including: