September 2026 Market Update: Rates Led the Month

September’s most important move was not in the stock market. It was in the price of money.

The Federal Reserve raised its policy rate on September 16, its first increase since 2023, to a range of 3.75% to 4.00%. The bond market moved further and faster than the Fed did. Over the month the 10-year Treasury yield rose from 4.75% to 5.29% and the 30-year from 5.25% to 5.64%. The 10-year’s 5.29% close was its highest since 2002.

In late September we set out why we think rates are likely to stay higher while federal spending runs well above its historical share of the economy. This update covers what higher rates did in a single month to the markets that run on borrowed money. Not all of what follows was caused by rates, and we say where it was not.

The Public Market, Briefly

On a price-return basis the S&P 500 slipped 0.45% in September, the Dow fell 4.29%, and the Nasdaq rose 1.86%. That leaves them up 11.78%, 5.92% and 15.57% for the year. The MSCI EAFE Index returned −3.05% for the month and the MSCI Emerging Markets Index −0.56%, both net in U.S. dollars, leaving them up 10.33% and 23.38% for the year.

Earnings are still carrying the market. FactSet’s consensus as of October 2 looks for earnings growth of 29.5% for the third quarter and 32.4% for 2026. The forward price-to-earnings ratio was 19.0, down from 19.6 in late August and slightly below its ten-year average of 19.1.

The economy sent mixed signals. Employers added 29,000 jobs in September, prior months were revised down by a net 60,000, and unemployment edged up to 4.2%. Second-quarter GDP was revised up to a 2.2% annualized rate. The PCE price index rose 3.4% in the year to August, and 3.0% excluding food and energy.

Bonds had a hard month. The Bloomberg U.S. Aggregate Bond Index returned −2.61% in September, leaving it down 2.91% for the year. Rising yields lower the price of bonds already held. The same move raises the income on new money.

Where Higher Rates Showed Up

Rates do not stay in the bond market. Alongside September’s move, most of what is priced off them moved too. The ICE BofA U.S. High Yield option-adjusted spread widened from 2.63% to 3.12% over the month, most of it in the last week. Freddie Mac’s 30-year fixed rate reached 7.28% on October 1, its highest reading since November 2023. Global M&A totaled $993 billion in the third quarter, down 41% from the second quarter (LSEG), and reports on the data cite rising Treasury yields among the causes. Year-to-date volume is still up 28% on 2025.

Private Markets: What Changed This Month

Last month we set out three arguments in full, on slow distributions, the exit channel and repurchase limits. They have not changed. Most third-quarter private-market data does not arrive until mid-to-late October; where a figure has not been updated, we say so.

Private Equity: Exits Rebounded, Then the Window Narrowed

The third quarter was a better exit quarter than the second. PitchBook’s first look at the quarter puts U.S. private equity exit value at $165.1 billion, up 51% from the second quarter, though PitchBook says a relatively small number of very large deals drove much of the rebound. One transaction dominated the quarter’s listings: a $26.5 billion U.S. offering by a memory-chip maker already listed in Korea accounted for 80% of third-quarter U.S. IPO proceeds (Renaissance Capital). Renaissance counts it as private-equity-backed, but it was a new listing for an already-public company rather than a private company coming to market.

IPO activity came in below expectations. Renaissance Capital cites concerns about AI spending, high bond yields and resumed rate hikes. For the quarter, 30 IPOs raised $32.8 billion, or $6.2 billion excluding the single large deal, and three sizable offerings were postponed near quarter-end (Renaissance Capital). September is the reminder that the exit channel is not unconditional: it narrowed as yields rose. No provider has published new buyout distribution or secondaries pricing figures since August.

Semi-Liquid Structures: The Third-Quarter Repurchase Season

Our practice has not changed, and we restate it as we did last month. We use semi-liquid, open-ended private equity structures alongside traditional drawdown funds for clients where private equity is appropriate. A repurchase limit is better understood as a protection for the investors who stay, and we would not invest client capital in an open-ended private markets structure that lacked one. We do not generally submit redemptions during periods of stress; we use the liquidity during periods of strong inflows. It is not a substitute for liquidity in the portfolio, and we would not present it as one.

The third quarter’s tender season is the clearest live test of those limits, and most of the data comes from private credit vehicles rather than private equity.

Requests eased but remain more than double the limits. Across non-traded BDCs, third-quarter repurchase requests were 11.5% of estimated net asset value, down from 12.7% for the same funds in the second quarter. About 40% of requested dollars were paid, and the unmet backlog fell to $8.2 billion from $9.8 billion (Robert A. Stanger & Co.). Every large non-traded BDC we could identify held its limit at 5% and paid pro rata.

Venture: Cooler Quarter, Record Nine Months

Global venture funding was $159 billion in the third quarter, down 25% from the second quarter but up 53% from a year earlier, bringing the first nine months to $679 billion, the highest first-three-quarters total of any year (Crunchbase, data as of October 2). Artificial intelligence took 64% of the quarter’s dollars. Exits remain thin: nine venture-backed companies listed in the U.S. in the quarter, raising $2.4 billion, and eight of the nine were biotechnology companies (Renaissance Capital).

Private Credit: Defaults Up, Valuations Under Scrutiny

A broad default measure set a record. Fitch’s U.S. private credit default rate reached 6.3% for the twelve months to August. Fitch’s definition is wide: it counts distressed exchanges and maturity extensions as defaults. A narrower measure, Proskauer’s index of senior-secured and unitranche loans, was 2.51% for the second quarter.

Regulators are focused on the marks. On September 28, SEC staff issued a statement on fair value for private assets, with particular attention to private credit. Among its points: a fair value must reflect what a market participant would consider at the measurement date, including prevailing credit spreads and liquidity, not only a borrower’s payment history.

Individual losses are real, and they are not the norm. Research we cited last month on second-quarter marks found roughly 85% of loans marked above 97 cents and fewer than 4% below 80.

Listed BDCs trade well below their stated net asset value. Across the listed BDCs Raymond James tracks, the median price-to-NAV ratio was 0.69 as of October 1. In our view the discount reflects both structural factors and doubt about where recoveries will land relative to reported marks, and it remains a security-selection question rather than a sector call.

Real Estate: Rates Reach the Debt

CMBS delinquency crossed 8%. Trepp’s September rate was 8.02%, up from 7.85% in August. Multifamily posted the largest increase, up 35 basis points to 8.04%.

Refinancing got harder. About $875 billion of commercial and multifamily mortgages matures this year (Mortgage Bankers Association). With the 10-year Treasury about 1.1 points higher than a year earlier, those loans are refinancing into higher rates than they would have a year ago.

Infrastructure and Energy: Physical Barrels, Futures Hopes

Physical oil trades well above futures. EIA’s daily Brent spot price peaked at $130.80 on September 15 and was $113.96 on September 29, while the expiring November Brent contract settled near $103.50 on September 30. EIA’s October outlook, released October 6, raised its Brent forecast again, to $96 for 2026 and $84 for 2027 from $91 and $74 a month earlier, but still expects prices to fall next year.

Traffic through the Strait of Hormuz remains far below normal. IMF PortWatch data show an average of about 3.7 vessel transits a day from September 1 to 27, against about 58 a day in January. Oil flows have partly recovered: Gulf oil flows excluding Iran reached more than 81% of pre-war levels in September, and about 40% of exports now bypass the strait (Kpler, as reported October 6). On October 4 Iran’s parliament speaker said the strait would not reopen until Iran’s conditions are met.

Power: the bottlenecks tightened. In the mid-Atlantic grid, PJM’s July auction for the 2028–29 delivery year cleared at its $325 per megawatt-day cap and still fell 6,831 megawatts short of its reliability requirement. No new figures on infrastructure fundraising or power purchase agreement prices have been published since August.

The Questions This Raises for a Plan

These are questions, not answers. What any of them means depends on a particular family’s holdings, timeline and plan, and none of it is a recommendation to buy, sell or hold anything.

On borrowing. What does the plan assume borrowing costs will be next year? We covered floating-rate debt in our late-September piece.

On non-traded and interval vehicles. For anyone holding one, what does the plan assume about how long a full exit takes at current request levels?

On real estate debt. For any property with debt maturing in the next 12 to 24 months, what refinancing rate does the plan assume?

If you’d like to work through any of this against an actual plan, we’re glad to talk it through.

The Bottom Line

September was a rates month. The Fed raised rates once, and the bond market moved further. Stocks largely absorbed it. Alongside the move, credit spreads widened, mortgage rates rose, deal volume fell and CMBS delinquency crossed 8%.