Market Commentary: September 17, 2026

Timothy A. Hoyle, Chief Investment Officer
thoyle@haverfordquality.com

Finding Ballast for Choppy Markets

Markets navigated a difficult week as oil prices surged alongside 10-year Treasury yields. Unfortunately, the view ahead also looks far from smooth sailing. We believe investors should brace for continued near-term volatility as markets confront a number of headwinds, both new and ongoing.  

Two lingering concerns remain at the forefront. First is rising yields. The 10-year Treasury is yielding near 5%, and sticky core inflation and rising energy prices prompted a September rate hike. Since history suggests that rate hikes are rarely, if ever, "one and done," Fed uncertainty is likely to keep markets on edge as investors grapple with higher rates across the yield curve. 

The second is rising oil prices as escalating Middle East tensions and the Russia-Ukraine war continue to disrupt supply. In addition to paying more at the pump, consumers are feeling the knock-on effects of record-high diesel prices on shipping, agriculture, and other industries. Higher energy prices and pass-through inflation effects make the Fed's job more difficult. 

As if those were not enough, new sources of turbulence have emerged. The fractious U.S. midterm election cycle is likely to exacerbate domestic tensions and market angst over the ensuing weeks. In an even stranger plot twist, former champions of AI, from technology executives to politicians, have suddenly turned against frontier models, warning of dire risks and doomsday scenarios while calling for industry guardrails and increased regulations. Some Chinese policymakers are also sounding alarms, even as they chastise U.S. negativity while aiming to push ahead in the AI race. Rising backlash against data centers has also emerged, unifying communities and local politicians in opposition. Anti-AI rhetoric is likely to remain a recurring theme in candidates' campaign platforms this election.  

Cynics view the sudden anti-AI groundswell as either an industry tactic to suppress competition and craft regulation in its favor, or as a political ploy to drive voter turnout. Whether these issues fade after the November elections remains to be seen. Until then, hyperscalers may be subject to increased scrutiny, and data center development could slow, although we do not believe materially so. Longer term, these trends ultimately may improve return on investment (ROI) by encouraging a more discriminating, methodical AI build out and replacing the manic, winner-take-all spending spree that has been driving up prices. However, while technology is typically a volatile sector, we expect even greater volatility in technology stock prices through the fourth quarter.  

In contrast, quarter-to-date returns for higher-quality and dividend-paying stocks generally have been steady. These stocks may offer potential ballast against tech sector gyrations, helping to dampen portfolio volatility. And if the AI trade falters, these stocks could be an important source of downside protection. 

Semiconductor Stocks versus Dividend-Paying Stocks

July 1, 2026 – September 15, 2026 

While the Fed and U.S. midterm elections may drive stock prices in the near term, we continue to believe that AI will be the theme that matters most over the medium to longer term. Tremendous demand for computing power remains as AI-enabled tools permeate our business and personal lives.