Executive Summary-- SEP.18.2026

THIS WEEK: 2nd Risk-OFF week in a row.

US Stocks DOWN, Foreign Stocks DOWN, Bonds UP and Gold UP

CENTRAL BANK UNISON — As widely expected, the Fed hiked its overnight bank rate 25 basis points to 3.875%. The Bank of England also hiked 75 basis points, the ECB hiked 75 basis points, and the Bank of Canada hiked 50 basis points. Central banks around the world are moving in unison to fight inflation.

GLOBAL OUTLOOK POSITIVE (4 of 4 and unchanged this week) — The Baltic Dry Index, oil and copper prices and bond yields are all higher, making the outlook very positive.

INFLATION — Export-Import inflation came in hot. WTI oil prices stayed around $100 for a second straight week. Global inflation per the Fed Check (83) still warrants tightening despite the latest rate hike.

US ECONOMIC DATA — Industrial Production Flat, Housing and LEI Down, Retail Up. Yield curve positive and steepening. Recession chances a year out shrinking and minimal. Money market system healthy per SOFR-T spread. Above average US growth prospects. GDP Now estimate (Q3) at 5.1% as of 9/17.

FEDERAL RESERVE — 1st rate hike since 12/25 rate cut this week. Fed Check (83) remains hawkish. The Fed's balance sheet currently stands at $6.74 trillion, with the Fed Funds Rate at 3.75-4.00%. By December, at least one more Fed rate HIKE (90%) is likely and possibly two.

INVESTMENT STRATEGIES — There were two modifications to the models this week.

INDEX MODEL: HOLD Emerging Markets (EEM)

The Global Index Model: HOLD Emerging Markets (EEM) 9/11/2026.

Equities are still the best place to be, beating cash, bonds, and gold, but for how long? Emerging Markets (EEM) remains the top-ranked asset class in the Global Index Model for the second consecutive week. The model's momentum signals continue to favor EEM over US large-caps, international developed markets, bonds, and gold. The relative strength of EEM versus other asset classes remains compelling, particularly given the backdrop of a weakening US dollar and improving global growth prospects outside the United States.

The decision to HOLD EEM rather than switch to SPY reflects the model's discipline: momentum must clearly shift before a rotation is warranted. This week's data does not yet support a switch. Investors should maintain their current EEM position and watch for any deterioration in the Baltic Dry Index, copper prices, or emerging market currency strength as potential early warning signals.

Strong gold kept the Index model in bullion to start 2026, with GLD outperforming all equity asset classes through the first quarter. The model rotated into EEM in late Q1 as emerging market momentum accelerated and gold's relative strength began to fade. Since the rotation, EEM has added meaningfully to the year-to-date lead over the SPY benchmark.

THE GLOBAL INDEX MODEL has been around for 34-years in one iteration or another. It is a momentum-based market timing model the latest version of which compares the relative strength of ETFs representing US stocks (SPY, IWM) and international stocks (EFA, EEM) along with US Treasuries (SHY, EDV) and Gold (GLD) in order to pick the single best asset class in which to invest your money. The model is updated weekly and the current recommendation is published each weekend in the Decision Moose newsletter.