The Hiking Cycle Returns: What September and Q3 2026 Meant for Investors
September 2026 was the month the world’s central banks turned back toward tightening. The US Federal Reserve raised rates for the first time since 2023, the European Central Bank and Bank of Japan followed, and the South African Reserve Bank lifted the repo rate to 7.25%. Oil climbed back toward $100 a barrel as US–Iran talks stalled, global bond yields hit multi-decade highs, and the JSE gave back August’s strong gains as gold and platinum miners reversed. Because we did not publish in July and August, this edition also looks back over the full third quarter.
Key Global Developments
The defining theme of September was the return of the rate hike. On 16 September the Federal Open Market Committee raised the federal funds rate by a quarter point to 3.75%–4.00% in a unanimous 12-0 vote, its first increase since 2023. Chair Kevin Warsh pointed to inflation that remains above the Fed’s 2% goal, with US consumer inflation at 3.4% in August, and to continuing tension in the Middle East. The Fed’s updated projections left the door open to another increase before year-end.
The Fed was not alone. The European Central Bank raised its deposit rate to 2.50%, the Bank of Japan lifted its policy rate to 1.25%, the highest in more than three decades, and Australia, Norway and New Zealand also tightened. The Bank of England held at 3.75%, but three of its nine members voted for a hike. Earlier in the year markets were debating how quickly rates would fall; in September the conversation turned to how high they might go.
Bond markets felt this most. The US 10-year Treasury yield rose about 54 basis points in September to around 5.29%, briefly trading above 5.3% for the first time since 2002. UK 30-year gilt yields approached 6%, and German and Japanese yields reached multi-year highs. Higher energy prices, large government deficits and heavy borrowing to fund the build-out of artificial intelligence (AI) infrastructure all added to the pressure.
Energy was the other driver. US–Iran talks failed to produce a breakthrough, and Brent crude rose roughly 14% over the month, briefly topping $100 a barrel. On the final day of the month President Trump denied reports that sanctions relief was on the table, and oil closed September near its highs.
Equities held up better than bonds, but only on the surface. The S&P 500 slipped just 0.3% for the month and remained up about 12% for the year, supported by technology and communication services. The average US share did far worse: the equal-weighted S&P 500 fell 4.8% and smaller companies in the Russell 2000 dropped more than 5%. US consumer confidence fell to its lowest level since 2014.
South African Market Impact
South Africa felt the global tightening directly. At its September meeting the Reserve Bank’s Monetary Policy Committee raised the repo rate by 25 basis points to 7.25%, taking the prime lending rate to 10.75%. Unlike July’s split decision to hold, this vote was unanimous.
The timing may look surprising at first. Stats SA reported headline inflation of 4.4% for August, below the roughly 5% many economists expected and down from 5.0% in June. But the SARB is looking ahead. It expects inflation to rise above 5% in the fourth quarter and into early 2027 as fuel prices climb again; at the time of the meeting petrol was being under-recovered by about R2.83 a litre. With major central banks hiking and global yields rising, the SARB chose to act early to stop higher fuel costs from feeding into wages and broader prices.
The growth backdrop makes this a difficult balance. The economy contracted by 0.2% in the second quarter, and the SARB trimmed its 2026 growth forecast to 1.2%. There were brighter spots: the Absa manufacturing PMI moved back above 50 in September for the first time in four months, and the SARB described the rand as notably resilient this year, which has helped contain import prices.
The rand weakened about 1.9% against a firmer US dollar in September, ending the month near R16.42/$, still marginally stronger than where it began the year.
Asset Class Performance
- Equities (global). MSCI World fell 1.2% in September but remains up about 12% year to date. The S&P 500 eased 0.3% while the tech-heavy Nasdaq gained about 1.9%. European shares lagged, with the STOXX 600 down 2.4% in euro terms. Emerging markets slipped 0.7% in dollar terms but are still up more than 23% for the year.
- Equities (South Africa). The JSE was one of the weaker markets in September. The FTSE/JSE Capped All Share fell 5.8%, leaving it down about 3.1% for the year to date. Gold miners fell about 15% and platinum miners about 7% after their August surge, while Naspers (-12%) and Prosus (-8%) also weighed. Retailers bucked the trend, with the sector up about 5% and Shoprite up 6%.
- Bonds. Global bond prices fell as yields rose. The SA 10-year government bond yield rose about 25 basis points to around 9%, which still offers a meaningful margin over current inflation.
- Currency. The rand eased 1.9% to about R16.42/$ as the US Dollar Index gained 2%.
- Commodities. Brent crude rose about 14% and briefly traded above $100 a barrel. Gold fell more than 6% in September, giving back much of August’s rally, and platinum lost about 5%.
The Quarter in Review: July to September 2026
Because this edition covers the full quarter, here is how July and August set the stage for September.
July: the truce breaks down and the SARB holds
The relief that closed out June did not last. In early July, attacks on commercial vessels in the Strait of Hormuz were followed by US strikes on Iran and the withdrawal of a temporary waiver on Iranian oil sanctions, and oil reversed its slide. At home, June inflation reached 5.0%, yet on 23 July the SARB surprised most economists by keeping the repo rate at 7.00% in a split 4-2 vote. The rand came under pressure, touching about R16.84/$ in late July.
August: gold shines and the JSE leads the world
August belonged to gold. As global bond yields surged, with the US 30-year yield above 5.3% for the first time since 2007, the US Treasury surprised markets on 19 August by doubling its buybacks of longer-dated bonds. Many investors read this as a sign of strain in government finances, and gold rose more than 13% for the month, one of its strongest months this century.
The JSE was the best-performing major equity market, with the Capped All Share up about 4.6% and gold miners up around 38%. The S&P 500 set new records, the rand firmed to about R16.14/$, and SA inflation eased to 4.3%. The month closed on a firmer note from Fed Chair Kevin Warsh at Jackson Hole, who made clear that returning inflation to 2% was his priority.
September: the hikes arrive
September delivered what Jackson Hole had foreshadowed: rate hikes from the Fed, the ECB, the Bank of Japan and the SARB, a sharp sell-off in bonds, and a reversal in gold and the JSE.
The quarter at a glance
- US equities: the S&P 500 rose about 2.0% for the quarter and the Nasdaq about 2.5%, but small caps (Russell 2000) fell about 7.5%. Gains were concentrated in large technology and AI companies.
- US bonds: the 10-year Treasury yield rose about 88 basis points to 5.29%, the largest quarterly rise in several years.
- Oil: WTI crude rose about 29% to around $90.55 a barrel, and energy was the best-performing sector.
- Gold: from about $4,027 to $4,188 an ounce (+4%), after trading above $4,600 in August.
- JSE: the Capped All Share ended the quarter down about 3.1% year to date, after standing 2.8% higher at the end of August.
- Rand: around R16.50/$ at the end of June, R16.84 at its late-July low, R16.14 at the end of August and R16.42 at quarter-end.
- Policy rates: SA repo rate 7.00% to 7.25%; US federal funds rate 3.50%–3.75% to 3.75%–4.00%.
Investor Implications
The quarter’s main lesson is that the interest-rate backdrop has changed. For much of the past two years investors positioned for falling rates. Q3 showed that with oil high and inflation sticky, central banks are prepared to move the other way. Assets that depend on falling rates, such as long-dated bonds and highly valued growth shares, can be more volatile in that environment.
It was also a quarter of sharp reversals. Gold miners rose about 38% in August and fell about 15% in September, and the JSE went from the world’s best major market in August to one of the weakest in September. Moves like these show the cost of chasing recent winners and the value of a diversified portfolio that does not depend on any single theme.
For South African investors, higher rates have a positive side. Cash and money-market returns have improved, and SA government bonds yielding around 9% offer real (after-inflation) income for investors able to accept price volatility. None of this is a recommendation to buy or sell any specific asset; it is context for a conversation with your adviser about whether your current positioning still matches your goals and time horizon.
Closing Perspective
Heading into the final quarter of 2026, three variables matter most: the path of oil and the US–Iran talks, how far global central banks are prepared to raise rates, and whether fuel prices push SA inflation above 5% as the SARB expects. Locally, the September CPI release on 21 October, the Medium-Term Budget Policy Statement and the next MPC decision on 19 November will set the tone. After a quarter of sharp swings, we would treat the current volatility as a reason to review portfolios calmly, not to react to headlines.
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This article is intended for informational purposes only and does not constitute financial advice. RockWealth Capital is an authorised Financial Services Provider. Past performance is not indicative of future results.
