Market and economic commentary
September 2026

September highlighted the difference between a resilient stock index and a resilient market. US and emerging-market equities advanced in Canadian dollar (CAD) terms, while Canadian equities, developed international equities, and bonds struggled. Positive AI-related earnings remained supportive, but higher borrowing costs made that support increasingly uneven. Up-to-date performance data for all ATB Funds can be found here.

Below are index one-month total returns in CAD terms as of September 30, 2026:

The Federal Reserve raised its policy rate by 25 bps to 4.00% on September 16. Equities rebounded the following day as oil and Treasury yields eased, but the bond recovery did not last. The US 10-year yield ended September at 5.29%, up from 4.75% in August. Canadian bonds lost 1.3% in September and were down 1.0% YTD, as income could not offset falling bond prices.

Fixed income strategy and valuation adjustments

The US Treasury expanded its long-term bond buyback limits from US$2 billion to at least US$4 billion per operation, effective September 9. These purchases can support bond prices. More broadly, we believe longer-term yields are closer to a peak, improving the outlook for bondholders. The opportunity lies in less risk of further net asset value (NAV) erosion, alongside potential price gains if yields fall. We are considering a shift to longer-duration bonds but have not yet made that change. Further yield increases remain a risk.¹

Oil remains a reason for caution. WTI ended September near US$90 per barrel, keeping inflation risks in view. Higher expected inflation can lift long-term yields and limit equity valuations. That adjustment is visible: projected earnings rose faster than share prices YTD, and the S&P 500’s forward P/E fell from roughly 22 times at the start of the year to 19 times by late September. Part of the correction has therefore occurred in valuations rather than headline prices.²

September’s divergence was clearer beneath the surface. In CAD terms, the equal-weight S&P 500 ETF (Ticker: RSP) fell 2.2%, while the S&P 500 gained 2.4%; their YTD gains were 14.2% and 17.2%, respectively. Both remained ahead for the year, but the monthly gap reflected how the largest companies in the index supported the headline while many other stocks posted lower relative returns.³

AI landscape and industry dynamics

AI remains central to that leadership, but competition is changing. We expect open-weight models, including DeepSeek’s September release, to win more everyday use, while frontier providers retain a premium for demanding work. Monetization still differs sharply: reported annualized revenue run rates reached US$65 billion for Anthropic at end-July and US$40 billion for OpenAI by August, against roughly US$1 billion for DeepSeek in September. These are sales run rates, not profits, and reporting dates and accounting bases differ.⁴

Competition also limits the scope for a coordinated slowdown. Anthropic’s Dario Amodei called for tempered capability advances, with support from OpenAI’s Sam Altman. We remain skeptical that an industry-wide pause would hold while Chinese developers continue to compete. Altman ruled out a 2026 OpenAI IPO and Anthropic’s timetable reportedly slipped, but delaying a listing may not mean slowing the race.⁵

Regional performance and Canadian fixed income

Regional returns also showed a divide. Canada and EAFE fell 2.7% and 0.7% in September, respectively, but remained up 12.9% and 14.0% YTD. Canada’s recovery faced renewed uncertainty from US tariffs and Canadian counter-measures, while the Bank of Canada held at 2.25% as energy costs complicated the inflation outlook.⁶ Europe faced energy and government borrowing concerns, while smaller technology weights in Europe and Japan offered less exposure to AI leadership. Emerging markets stood apart, rising 2.0% in September and 27.2% YTD. By late September, upgrades to 2026 earnings forecasts were much larger in EM than in Europe or Japan. That more positive earnings backdrop helped EM withstand higher financing costs, but left the rally dependent on companies continuing to deliver.⁷

Canadian bonds struggled for another month (-1.3%) as Canada 10-year backed up to finish the month at 4.0% again. While closer to a top than before, the Canadian yield curve has yet to catch up to the US, so we anticipate a slower path to the top.  

Compass Portfolios Series F1 - Returns net of fees (%)

ATBIS Pools Series F1 - Returns net of fees (%)

ATB Monthly Income Portfolio Series F1 - Returns net of fees (%)

¹ Federal Reserve, September 16; US Treasury daily yields and buyback announcement, August 19, 2026; higher limits effective September 9.
² GS US Weekly Kickstart, September 25, pp. 3–5; pricing September 24. WTI: CNBC, September 30 settlement.
³ Yahoo Finance adjusted closes for RSP/SPY, converted using CAD per US dollar daily closes. XUS returns differ because of fund prices, fees and valuation timing.
⁴ CNBC, August 17 (Anthropic) and August 14 (OpenAI); The Information, via Reuters, September 24 (DeepSeek). Reported revenue run rates; dates and accounting bases differ.
⁵ Dario Amodei, We Must Pace the Frontier; Reuters, September 12 and September 18, 2026 (IPO plans).
⁶ Bank of Canada policy statement, September 2, 2026.
⁷ GS Global Weekly Kickstart, September 28, exhibits 23/36 (September 25 data); GS GOAL Kickstart, September 21, pp. 1–2.