Equity Markets Defy Rate Hikes as Mag 7 Stocks Shield S&P 500

The global economy is facing a peculiar situation where central banks are aggressively raising interest rates to combat inflation, but major equity indices, particularly in the United States, continue to defy these headwinds.

On September 16, 2026, the US Federal Reserve raised its target range for the federal funds rate by 0.25 percentage points to 3.75%-4%, following a unanimous 12-0 vote by the FOMC.

This move is part of the Fed's hawkish stance, with its 'dot plot' indicating expectations for yet another hike before the year is out.

The Bank of Japan (BOJ) also increased its rates to 1.25% on September 18, 2026, marking its highest level since 1995, while the European Central Bank (ECB) raised its key interest rates by 0.25 percentage points on September 10, 2026.

The coordinated global rate hikes have led to a surge in fixed income markets, with the 10-year Treasury yield reaching 5% on September 19, 2026, making it more expensive for businesses to borrow and expand.