Market Insights Recap — Week of September 21, 2026

Hello. I'm Steve Orr, Chief Investment Officer for Texas Capital's Private Bank.

Last week, we said it was a close call, whether the Fed goes with the higher rates or not. Steady employment numbers, low inflation expectations, declining money supply. They all argued for the Fed to stand pat. Well, the Warsh Fed went ahead and raised rates by a quarter of a point. The new range for Fed funds is now 3.75 to 4%. So at least cash earnings are close to inflation again. 

Now, since Warsh took over the chairmanship in May, core CPI inflation has declined from 2.9% down to 2.4%. Now, August marks the 65th month of inflation, riding above 2%. But remember, most of the headline 3.5% inflation is driven by fuel costs. Now, the last time a Fed reacted to temporary higher fuel costs was back in 2001, and they hiked enough times back then that we got a recession. And we hope the Fed learned that lesson. 

Now, theoretical Fed funds models project a neutral rate, not too hot, not too cold, around 4.5%. So pencil in two more hikes, one in December and one in the spring. And one interesting fact we noticed was that the Fed staff projects the Fed to be cutting rates in 2028. Given their accuracy in the past, I wouldn't bet on that.

So we're almost done with September. And stock returns are basically flat. Small caps? They're down about 3%. The Philly semiconductor index, it's bounced 3% higher as traders rotate away from defensives back to the Mag seven and tech. Stocks have been taking rising interest rates and oil prices in stride, especially considering it's September, one of the two worst months of the year for stock returns. 

Overall, the economy is in good shape. We're on track to post 3% growth this quarter. In the next 12 months, have a mildly bullish outlook thanks to easy fiscal and monetary policy. So stay patient with our stock positions. Keep a low bond exposure, moderate commodity exposure and cash is performing even better; 'til next time.