The Bond Market In September

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Today is September 25 Across the country, counties, cities, and even two states have declared today Dalai Lama Day. It's a nod to her hit movie, 925 Year to date, gold's down about 1%.

Bitcoin's down about 3.5%. The Magnificent 7 is up almost 10%. The Russell 2000 up 14.2%. The Nasdaq up 16%. And the S&P 500 up 12.5%.

For the month of September, the big story has been the bond market. I'll get to that in a minute. Oil prices declined today, as US and Iranian negotiators explored a plan that would see Tehran reopen the Strait of Hormuz. The two countries which have failed to make similar agreements in recent months were pushing for a breakthrough on the sideline of the United Nations General Assembly.

Donald Trump's fit for China's Xi Jinping has been heavy on patrantry and platitudes, yet light on substance. From a tarmac greeting to a candlelight dinner, the United States president pulled out all the stops for his VIP guest. A lot of luminaries from Wall Street and Silicon Valley came for dinner. Taiwan remains a very thorny issue with Xi, pro-Trump to oppose the island's independence. I can appreciate the fact that the two leaders met, but I'm also cognizant as a Wall Streeter that the meeting didn't produce any truly game-changing economic breakthroughs. The 10-year Treasury yield has risen 44 basis points this month to 5.2.

The market cap at cap-weighted S&P 500 has barely flinched. It's up two-tenths of a percent for the month. The real story is the equal-weighted S&P 500 is down 4.2%. The Russell 2000 is down 4.1%. The S&P mid-cap 400 is down 3.3%. And nine of the 11 S&P 500 sectors are down, and down big in some cases. The utility sector is down 6.3%. For the month, the materials sector is down 5.2%. The financial sector is down 5.2%. Real estate is down 4.8%. Consumer discretion is down 4.6%. Industrial sector is down 3.4%. So to say the stock market has not felt the impact of rapidly rising interest rates is misleading, really has. For now, the stock market is riding the leadership of mega-cap stocks and semiconductor stocks, which are the twin pillars of the AI trade.

So you know the deal by now. September is really giving you a good lesson on how bond yields work. Bond yields are rising because investors are worried about persistent inflation fueled by higher oil prices, which could drive up interest rates. At the same time, the rationale for rate hikes has been strengthened by a surprisingly resilient American economy that looks like it can absorb them. The rapidly growing, supersized US debt pile means that the Treasury has to keep issuing large amounts of bonds. Whose higher yields could lure investors at the expense of the stock market. Mortgage rates hit 7% for the first time since January 2025 Abstaining from the avocado toast probably won't be enough to help you buy a house if you're younger. The average 30-year fixed rate mortgage now sits at 7.03%. That's up from 6.3% a year ago and represents the first time mortgages have breached the psychologically significant 7% mark in 20 months. That is likely to keep the already stagnant housing market from growing much. The housing market plays into our confidence of how wealthy we are or not. Now, Costco's digital sales hit 33 billion in 2026, growing more than 20%.

Costco's business is increasingly living beyond the doors of its core warehouses.

$33 billion during the fiscal year grew by more than 20%. Partnerships with delivery platforms have been key to fueling the digital growth. In the United States, Costco has announced within the past month that members will now be able to get delivery nationwide through DoorDash and Uber Eats. Customers have to enter their member number at checkout to prove they are a Costco customer. Costco first piloted a grocery delivery service with Instacart in 2016

Costco initially trialed the Uber Eats partnership in 17 states before announcing in mid-September that it would be rolling out nationwide.

These platforms are also helping Costco attract a younger customer. Since COVID, the number of Costco members under 40 has grown more than 60%. And these members now account for more than a quarter of Costco's total membership base.

While younger members start out spending a little less over time, they grow into higher-spending members. Costco's business shows no signs of slowing down, and the club retailer has multiple levers to pull to keep its members spending.

For the year, Costco saw net sales of 297.2 billion, up 10% year-over-year.

The percentage of Costco members who purchased gas hit an all-time high, as consumers sought to save money on gas in the face of the Iran War. Costco's pharmacy business grew 20% during the year. The company expanded digitally-enabled purchasing capabilities, like mobile pay, ahead of, like using mobile pay ahead, and pick up lockers. That's interesting. You can get your prescription. They'll put it in a locker. They'll give you the code. You just roll in. I like what Costco is doing there.