A Rate Hike Is Now 85% Priced. Stocks Rallied Into It

Odds of a Federal Reserve increase Wednesday moved from 58% to 85% across five sessions, and the S&P still closed Friday up 0.86%. Financials took the top position in the even-weight strategy, and it's the one sector whose revenue is set by the policy rate.

Brad Roth
September 13, 2026

TL;DR

• The market now prices an increase at Wednesday's meeting at 85.5%, against 58.4% a week ago. The target range would go to 3.75% to 4.00%.

• August consumer prices landed in line on the headline at 3.4% year over year, but core ran 0.3% on the month against a 0.2% consensus. Equities rallied anyway and volatility fell 11.2% Friday.

• The two-year note added 26 basis points on the week and the thirty-year closed at 5.354%, a nineteen-year high. Both systematic strategies ended near fully invested.

Week in Review

Weekly closes, Friday 9/11/26

• The S&P 500 closed at 7,656.98, down 0.80% on the week.

• The Dow ended at 52,573.29, down 1.57%.

• The Nasdaq Composite finished at 26,333.04, down 0.66%.

• The Russell 2000 closed at 2,903.94, down 2.41%.

• The VIX ended at 15.84 against 14.53 a week ago.

The repricing happened at the front of the curve again, and it was bigger this time. The two-year note closed at 4.644% against 4.379% a week earlier, a move of 26 basis points. The ten-year went to 4.975% from 4.784% and the thirty-year to 5.354% from 5.246%. That narrowed the gap between the two-year and the ten-year to 33 basis points from 40. West Texas settled at $99.99 and Brent at $104.47, up 9.3% and 8.5%. Gold ended at $4,390 an ounce, down 1.9%, and silver at $65.02. The dollar index closed at 98.84.

Two releases moved the week. August producer prices Thursday were benign on the month and ugly on the year, headline at 5.4% against 4.8% in July and core at 4.6% against 4.3%. Odds on a September increase went to 69%. The European Central Bank raised to 2.65% from 2.40% the same morning. August consumer prices arrived Friday in line on the headline, 0.4% on the month and 3.4% on the year, with the core rate easing to 2.4% for a second consecutive month. The detail that mattered was the monthly core at 0.3% against a 0.2% consensus, and gasoline 27.4% higher than a year ago. Odds closed at 85.5%. Equities took the annual numbers and bought them. The bond market took the monthly one and sold. Three of eleven American sectors finished the week higher.

Allocation Changes

Both published strategies ended the week owning exactly what they owned going into it.

The index strategy runs the S&P 500 at 50.4% and the Dow at 48.7%, with 1.0% in T-bills. The even-weight sector strategy holds the same six real-economy sectors, and the spread between them tightened to 105 basis points from 129: financials at 16.6%, healthcare at 16.5%, materials at 16.2%, industrials at 15.7%, real estate at 15.7% and utilities at 15.5%, with 4.2% in cash. Financials moved into the top position. That is what even sizing does over a week when the market is repricing one number.

Where the week actually hurt was the small end. The Russell 2000 fell 2.41% against 0.80% for the broad measure, a spread of 161 basis points. Neither systematic strategy owns small companies, and neither owns a concentrated position in any single name. Both are built from large American businesses spread wide.

The actively managed strategy carries 21 positions, the same count as a week ago, and it moved toward both of the week's inputs. The interest-rate hedge went to 4.6% from 4.4%. The direct energy position went to 13.9% from 13.6% as crude added 9.3%, and the broad commodity fund to 4.9% from 4.7%. The long dollar position was unchanged at 14.5% and remains the largest single line.

The Bigger Picture

The producer report Thursday is the one that changed the regime, and it's worth being precise about why. The monthly numbers were fine. The annual rates accelerated, headline to 5.4% from 4.8% and core to 4.6% from 4.3%. That's the signature of a supply shock working through a production chain on a lag. Crude has been repricing since March, and the cost shows up in a producer's input line before it reaches a consumer's basket. Gasoline was 27.4% higher in August than a year earlier. By Friday the market had decided the answer arrives Wednesday, and the projections that come with it will say whether one increase is the whole plan.

Financials is the largest of the six sector positions and the one most directly attached to that decision. A higher policy rate raises what a bank earns on its assets right away and what it pays on deposits later. The complication is the shape of the curve rather than its level. The front end moved 26 basis points this week against 11 at the long end, and the gap between the two-year and the ten-year closed at 33 basis points against 40. A strong policy rate widens the margin. A flatter curve compresses it. Wednesday sets both at once. Real estate at 15.7% and utilities at 15.5% sit at the other end of the same question, valued off the long rate where the move was smallest. Real estate was the best of the six across the week.

Energy led all eleven American sectors for a second straight week and is not one of the six. The case is in the price path, not the direction. Crude was up 12% through Thursday, then gave back 2.4% Friday to finish the week 9.3% higher, with no ceasefire, no producer-group decision and no inventory surprise behind the reversal. A sector whose earnings are set by a number that drops two and a half dollars on no news hasn't built the trend the system will own. That rule costs a week like this one. It's the same rule that keeps the strategy out of the reversal when it comes.

THOR Risk Gauge

Firm. Both systematic strategies closed the week near fully invested, at 99% and 96%, and volatility ended at 15.84 after closing at 17.84 Thursday. That is a market that priced an increase and then stopped worrying about it. The caution is the long end, where the thirty-year sits at a nineteen-year high, and a decision Wednesday that arrives with a fresh set of projections attached.

Signal Watch

THOR Index Rotation — As of 9/11/26

Half in each of the two oldest American benchmarks, 99% invested, with a point in bills. They finished the week 77 basis points apart, which is wide for these two and the reason for owning both rather than choosing.

THOR Low Volatility — As of 9/11/26

Six sectors inside a single point of each other, and the six answer to three different drivers. Two are valued off the long rate, two off the growth cycle and two off what people spend regardless. Wednesday's decision reaches all three by a different route.

THOR AdaptiveRisk Dynamic — As of 9/11/26

The actively managed strategy runs 59.1% in equities, 16.0% in commodities, 14.5% in specialty currency exposure, 5.6% in alternatives and 4.6% in rate hedging. The rate hedge was raised across the week the market moved from 58% to 85% on a Federal Reserve increase, and the energy position was added to as crude gained 9.3%. That top of the strategy is a macro expression rather than an equity one.

Weekend Reading

Behind the Ticker — The ETF That Invests in What Made Billionaires Rich, with Andrew Skatoff of Bancreek Capital. Skatoff is back for a second appearance, with Bancreek now running roughly $300 million across four funds after ringing the opening bell at the NYSE. He walks through the fund launched in May that owns the thirty family-founded public companies that created the wealth, rather than the portfolios those families hold today.

Fed rate hike in September is all but guaranteed after CPI report, economists say (CBS News, September 11). The clean read on Friday morning, with the forecaster revisions collected in one place and the gasoline line that explains most of the annual number. It would be the first increase since 2023.

Bank of Japan Rate Hike Forecasts Accelerate, Survey Shows Next Move by January (Bloomberg, September 11). Every one of the fifty-two economists surveyed expects Japan to move this Thursday, and 93% expect another by January. The third major central bank tightening into the same energy shock, two days after ours.

The Battle for Hormuz Will Reshape the Global LNG Market (CSIS, August 5). Leslie Palti-Guzman on the part of the blockade that gets less attention than crude. Qatari gas moves through the same water, and the diversification it's forcing toward Western Hemisphere suppliers looks structural rather than temporary.

Quote of the Week

"Don't fight the Fed. Don't fight the tape."

— Martin Zweig, Winning on Wall Street, Warner Books, 1986

Brad Roth / CIO, THOR Financial Technologies

This content reflects the opinions, analyses, and research of THOR Financial Technologies as of the date published. It is provided for informational and educational purposes only and does not constitute investment advice and should not be relied upon as the basis for any investment decision. Past performance doesn't guarantee future results, and all investments involve risk. For more information, please go to: thorft.com