The Markets

The influence of supply and demand.

Last week offered a lesson in supply and demand, along with a reminder that financial markets are always looking to the future. As disruptions in the Middle East squeezed oil supplies, rising fuel prices and August inflation data seemed to set the stage for higher interest rates and lower stock prices. Then, Friday’s news that demand for oil may be weakening changed the outlook, and stock markets found a bit of relief.

Here are some highlights from last week:

  • There was an oil supply shock. Conflict in the Middle East expanded, further reducing the availability of oil. “For Middle Eastern oil producers, there are fewer and fewer places to hide from Iranian violence. And because of that, oil prices are almost certain to stay high,” reported Avi Salzman of Barron’s.
  • Falling supply pushed fuel prices higher, pressuring inflation. Diesel fuel reached an all-time high of $6.00 a gallon, up from $3.70 a year ago. Diesel is required for “around 70 percent of the movements of freight, rail, agriculture, and construction equipment, and is a key component of domestic inflation when prices rise,” reported Callum Keown and Martin Baccardax of Barron’s.
  • Higher inflation changed the interest rate outlook. Consumer and Producer Price readings for August arrived last week, showing inflation remained high. As investors considered the possible impact of higher oil prices, the chance of a Fed rate hike in September climbed above 85 percent, according to CME FedWatch. In response, the 10-year Treasury yield approached 5 percent.
  • The forecast for oil demand changed. On Friday, the International Energy Agency (IEA) Oil Market Report forecast that global demand for oil will fall more sharply than expected in the latter half of 2026 because of higher prices and economic disruptions.

Markets welcomed the possibility that weaker demand for oil could eventually ease oil prices and inflation pressures. After four days of declines, stock markets rallied on Friday.

The supply problem, however, has not gone away. The IEA expects oil supply to fall even faster than demand, while global inventories are being rapidly depleted. In other words, Friday’s rally did not indicate the oil shock is over. It reflected a change in the outlook, and a reminder that markets care about where prices are today, and where they may be headed tomorrow.

Last week, major U.S. stock indexes finished the week lower, despite advancing on Friday. Yields on U.S. Treasuries moved higher across the yield curve.


Data as of 9/11/26 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 Index -0.8% 11.9% 16.2% 19.5% 11.4% 13.5%
Dow Jones Global ex-U.S. Index -1.2 13.7 19.7 16.9 5.9 6.8
10-year Treasury Note (yield only) 4.98 N/A 4.0 4.3 1.3 1.7
S&P GSCI Gold Index -1.5 1.6 20.0 31.3 19.7 12.8
Bloomberg Commodity Index 1.6 32.4 40.9 10.8 8.3 5.6

S&P 500, Dow Jones Global ex-US, S&P GSCI Gold Index, Bloomberg Commodity Index returns exclude reinvested dividends. The three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Here’s How a Bond Works

A bond is a loan. When investors buy U.S. Treasury bonds, they agree to lend their money to the government for a specific period of time. In return, the government agrees to pay interest for that period and return the amount borrowed when the bond matures. In the interim, Treasury bond rates may move higher or lower. The market value of the Treasury, which is the value an investor receives if they sell the bond before maturity, will change to reflect current rates.

How Do Rates Affect Bond Prices?

There is a question about this on FINRA’s financial literacy quiz that stumps a lot of people every year. It asks: If interest rates rise, what will typically happen to bond prices?

  1. They rise.
  2. They fall.
  3. They stay the same.
  4. Nothing. There is no relationship between interest rates and bond prices.

The correct answer is that bond prices fall when rates rise.

There Is an Inverse Relationship Between Bond Prices and Interest Rates

Imagine that a fictional investor, Chris, buys a 10-year U.S. Treasury for $1,000. It pays 4 percent interest. After a few months, interest rates rise. Newly issued 10-year Treasuries offer 5 percent interest. Chris can hold the bond to maturity (and continue to receive 4 percent interest) or sell it. If Chris sells, the bond will be worth less than the amount originally paid because new bonds have higher rates.

  Bond Pays Bond Price Bond Yield
Chris’s original bond $40 $1,000 4%
Newly issued bonds $50 $1,000 5%
Chris’s bond repriced for higher rate $40 $ 800 5%

It works the other way, too. Imagine that after Chris buys the bond, interest rates fall, 10-year U.S. Treasuries now pay 3 percent interest. Chris can hold the bond (and receive 4 percent interest until maturity) or can sell the bond. It will be worth more than Chris paid because new bonds have lower rates.

  Bond Pays Bond Price Bond Yield
Chris’s original bond $40 $1,000 4%
Newly issued bonds $30 $1,000 3%
Chris’s repriced bond with rate fall $40 $1,330 3%

It may help to think of bonds as a seesaw. At one end are bond prices, at the other are interest rates. As one falls, the other rises. If you have questions about bonds, please get in touch.

Weekly Focus – Think About It

"Where there is great love, there are always miracles."

–Willa Cather, Author

Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

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  • Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
  • Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
  • The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
  • All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
  • The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
  • The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
  • Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
  • The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
  • The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
  • International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
  • Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
  • Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
  • Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
  • Past performance does not guarantee future results. Investing involves risk, including loss of principal.
  • You cannot invest directly in an index.
  • Stock investing involves risk including loss of principal.
  • The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
  • The Price-to-Earning (P/E) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means investors are paying more for each unit of net income, thus, the stock is more expensive compared to one with a lower P/E ratio.
  • The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
  • Consult your financial professional before making any investment decision.

https://www.barrons.com/articles/saudi-arabia-pipeline-attack-oil-prices-baad5543 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/09-14-26-Barrons-The-Saudi-Arabia-Pipeline%20-%201.pdf

https://www.barrons.com/articles/diesel-prices-fed-rate-decision-c9076122 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/09-14-26-Barrons-Record-Diesel-Prices%20-%202.pdf

https://www.bls.gov/news.release/pdf/ppi.pdf

https://www.bls.gov/news.release/PDF/cpi.PDF

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/09-14-26-CME-Group-Fedwatch-Tool%20-%205.pdf

https://www.cnbc.com/2026/09/10/the-10-year-treasury-yield-nears-5percent-what-it-means-for-income-investors.html

https://www.iea.org/reports/oil-market-report-september-2026

https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2026/09-14-26-Barrons-DJIA-S&P-Nasdaq%20-%208.pdf

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=202609

https://www.investopedia.com/articles/bonds/08/bond-market-basics.asp

https://www.finra.org/financial_knowledge_quiz

https://www.goodreads.com/author/quotes/881203.Willa_Cather

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