Diamond Capital Management's Market Commentary
September, 2026
Andrew Khosrofian, CFA, CAIA
Vice President and Portfolio Manager
Executive Summary:
- Economic growth has slowed, but timely indicators point to continued resilience.
- Inflation remains above target, while oil prices, Treasury yields, and labor softness complicate Fed policy.
- Equities advanced in August, supported by strong earnings and contained volatility.
- International equities continue to provide valuable diversification.
- The outlook remains constructive, with inflation, energy costs, labor, and interest rates as key risks.
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Economic growth has moderated, but timely indicators suggest the economy remains resilient despite persistent inflation and elevated interest rates. The latest quarterly real GDP reading showed annualized growth of 1.5%, down from 2.1% in the prior quarter, while the Dallas Fed’s Weekly Economic Index registered 3.06% for the week ending August 29, with its 100-day moving average at 2.45%. Continued expansion across manufacturing and services further supports the view that underlying economic momentum remains intact.
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Risks, however, remain. Manufacturing activity continues to hold in expansion territory, though results have been below expectations, and consumer discretionary spending remains subdued.
The August employment report showed stronger-than-expected job growth of 162,000, while the unemployment rate held steady at 4.1%, suggesting the labor market has more momentum than previously anticipated. While encouraging from an economic standpoint, the strength in hiring may complicate the Federal Reserve’s policy path by reinforcing the case for maintaining, or potentially raising, interest rates.
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Inflation has improved, with core CPI at 2.5%, but headline inflation remains above 3% and PCE inflation remains elevated at 3.7%. Higher oil prices and elevated long-term Treasury yields continue to present meaningful headwinds.
Equities advanced in August despite the mixed macroeconomic backdrop. The S&P 500 gained 2.72% for the month and is up 13.63% year to date, while volatility remained contained. All S&P 500 sectors are positive for the year except Consumer Discretionary, consistent with softer consumer trends.
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Strong corporate earnings have continued to support market gains, and international equities have provided important diversification benefits, with the MSCI EAFE Index up more than 14% and the MSCI Emerging Markets Index up more than 24% year to date.
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The information and material contained herein is provided solely for general information purposes. This material is not intended to be investment advice nor is this information intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only current as of the stated date of their issue. Certain sections of this publication contain forward-looking statements that are based on the reasonable expectations, estimates, projections, and assumptions of the authors, but forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Investment ideas and strategies presented may not be suitable for all investors. No responsibility or liability is assumed by The National Bank of Indianapolis, or its affiliates for any loss that may directly or indirectly result from use of information, commentary, or opinions in this publication by you or any other person.
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