LaSalle St. Monthly Mile Markers – September 2026
At a glance: The S&P 500 returned +2.7% in August and set a new all-time high. Five of the eleven S&P 500 sectors traded higher, with four outperforming the broad index. Energy led all sectors, up 7.0%, followed by Technology, up 6.2%, as the sector rebounded from a July selloff, and Materials, up 6.0%, as gold gained nearly 10% for the month. Utilities led to the downside, down 4.8%, followed by Industrials, down 2.6%, and Real Estate, down 1.9%.
Bonds also traded higher in August despite Treasury yields rising throughout the month. The U.S. Bond Aggregate returned +0.4%, investment-grade corporate bonds modestly outperformed with a +0.5% total return, and high-yield bonds gained +1.0%.
International equities advanced as well. Developed markets gained +2.0%, underperforming the S&P 500, while emerging markets returned +3.4% and outperformed, as international technology stocks rebounded alongside their U.S. counterparts.
Key Takeaways:
• The S&P 500 returned +2.7% in August and set a new all-time high, with strength broad across large, small, and equal-weighted indexes, even as Treasury yields rose to multi-year highs over the same month.
• The Fed: Chair Warsh’s Jackson Hole remarks turned more hawkish, raising the possibility of a rate increase rather than a cut, a shift in tone from his more market-led tightening stance earlier in the summer that we are watching closely.
• Treasury and the Fed’s balance sheet: The Treasury buyback program and the Fed’s reserve management purchases are debt-management and liquidity tools, not a new round of quantitative easing, though the Fed’s balance sheet is genuinely expanding again and Treasury’s TGA drawdown (the “Treasury Twist”) is a real, near-term liquidity injection worth monitoring.
• Gold and the dollar: Continued central bank gold buying and a declining dollar reserve share reflect a structural, multi-year reserve-diversification trend rather than a single catalyst or a near-term signal on its own.
• Energy and geopolitics: The Strait of Hormuz situation remains unresolved and continues to weigh more on diesel and refining margins than on crude oil itself; markets have grown less reactive to each new headline as the year has progressed.
• Positioning: We continue to run fixed income shorter than benchmark, a stance in place for several years that this month’s Treasury issuance and yield backdrop is consistent with, and we are modestly more constructive on gold, suitability-caveated bitcoin, and liquidity-sensitive equities.
• Outlook: Our near-term view is modestly constructive given the interplay of monetary, fiscal, and liquidity conditions described in this piece, however the Fed’s more hawkish recent tone warrants monitoring.
He Who Owns the Gold Makes the Rules
Gold and the U.S. Treasury market have both drawn headlines this summer, and for related reasons. Sovereign gold buying continues at a multi-year pace, the dollar’s share of global reserves keeps drifting lower, and the Treasury has expanded a bond buyback program that some commentary has labeled a stealth form of quantitative easing. Individually, none of these developments is alarming. Together, they describe a financial system working through the practical consequences of large, persistent government borrowing and a world gradually diversifying away from reliance on a single reserve currency. This month’s Mile Marker separates the routine plumbing from what is genuinely new and updates our positioning accordingly.
Treasury “Intervention”: Routine Debt Management, Not Quantitative Easing
On August 19, the Treasury announced it would double the maximum size of its long-end buyback operations, from $2 billion to at least $4 billion per operation, beginning September 9 and continuing through the current refunding quarter. The purchases are concentrated in the 10-to-20-year and 20-to-30-year sectors, and Treasury has described the purpose as providing “liquidity support” where it is receiving a high volume of attractive offers to sell.
Buybacks are a normal part of Treasury debt management, not a new tool. The Treasury regularly issues debt across a range of maturities, retires what matures, and manages the overall duration profile of debt outstanding. Bonds issued decades ago eventually become “off-the-run” securities: still fully backed by the U.S. government, but thinly traded, since most investors and dealers have moved on to more recently issued, more liquid maturities. During periods of stress, most notably the March 2020 dash for cash, dealers found themselves needing to convert those older, oddly dated bonds into cash or into more standard maturities and struggled to do so quickly. The buyback program exists to make that swap easier before it becomes a source of stress, not after.
The buyback program itself is different from quantitative easing. Quantitative easing involves the Federal Reserve creating new reserves to purchase securities, expanding the money supply and the Fed’s balance sheet. A Treasury buyback is debt-neutral: it retires one government security using cash raised elsewhere in the borrowing program, without touching the Fed’s balance sheet at all. Only the Federal Reserve, alongside other major central banks, can conduct that kind of monetization, and the buyback program is a Treasury tool, not a Fed one.
That said, the Fed’s own balance sheet is genuinely expanding again, separately from anything Treasury is doing, and we do not want to understate that. The Fed, now under Chair Kevin Warsh, who was sworn in this past May, ended quantitative tightening in November 2025, and by early December had begun what it calls “reserve management purchases,” buying roughly $40 billion a month in short-dated Treasury bills to rebuild bank reserves ahead of seasonal liquidity pressure, particularly around the April tax date. The Fed’s total assets bottomed out near $6.54 trillion in early December and had grown to roughly $6.75 trillion by mid-August, an increase of about $210 billion. The Fed distinguishes this from QE on the grounds that the purchases are concentrated in short-term bills rather than longer-duration securities and are aimed at reserve adequacy rather than easing broader financial conditions; purchases were also originally described as tapering sharply after Tax Day, though the balance sheet has kept growing well past that point, which is worth watching rather than taking at face value. We would treat this Fed-side balance sheet growth, not the Treasury buyback program, as the more genuine test of whether “this is not QE” holds up, and it is the piece of this story we plan to track most closely into year-end.
The scale makes the point. A single buyback operation, even at its new, larger size, is worth $4 billion. That compares with $125 billion raised in this month’s combined 3-, 10-, and 30-year refunding, and roughly $453 billion auctioned across just the five benchmark bill maturities in a single week in mid-August. Treasury is on pace to issue well over $300 billion in coupon securities alone in September. Buybacks address a real microstructure problem in the off-the-run market, but they are not large enough, on their own, to move the aggregate supply-and-demand balance for Treasury debt.
That imbalance still shows up in the yield curve. The 30-year yield has traded near 5.2 to 5.3 percent in recent weeks, close to its highest level in roughly two decades, while the curve between 2- and 10-year yields remains positively sloped, around half a percentage point. A steep, upward-sloping curve after years of flatness or inversion is consistent with a market demanding more compensation for holding long-dated debt against a heavy issuance calendar. It is not, by itself, a signal of financial distress.
A New Wrinkle: Bessent’s $935 Billion “Treasury Twist”
A further, more consequential development builds directly on the buyback story above. The Treasury General Account, the government’s operating checking account held at the Federal Reserve, stands at roughly $935 billion as of August 20, nearly double the balance the prior administration targeted. According to CNBC’s report, two senior Treasury officials have confirmed that Secretary Bessent’s office now considers this balance available to help fund the expanded long-bond buyback program, drawing down existing cash rather than issuing new debt to pay for the purchases. Bessent has described the approach as a “Treasury Twist,” combining long-bond buying with short-term financing. The 10-year yield fell by about four basis points on the news.
This is worth taking seriously as a distinct mechanism from either the Treasury buyback program or the Fed’s reserve management purchases described above, and it is more consequential than either. The TGA is not idle in the way a personal savings account is idle: when the balance rises, it drains reserves from the banking system, and when it falls, it adds back, the same monetary plumbing we described in our prior writing on this subject. Spending down the TGA to buy long bonds is not money creation in the way Federal Reserve asset purchases are, no new base money is created, and the Fed’s own balance sheet is untouched by this specific action, so we would stop short of calling it monetization outright. But it is a real, near-term injection of liquidity into the banking system, timed to lean against the same long end yields the buyback program already targets, and that is a meaningfully more direct form of intervention than the buyback program’s mechanics alone. We think this is the most important of the two channels to watch, precisely because it blurs the line the Treasury has been at pains to draw.
Two trade-offs are worth naming directly. First, this is not a permanent fix: Treasury has historically kept a floor near $150 billion in the TGA as a cushion against market disruption, and drawing the balance down toward that floor thins the buffer against a debt-ceiling event, with some estimates suggesting the timeline to the next debt-ceiling deadline could move up to winter or early spring. Rebuilding the account afterward will require additional issuance later, deferring rather than eliminating the underlying borrowing need. Second, the framing has drawn real pushback. Lou Crandall of Wrightson ICAP, a respected voice on Treasury market structure, said the timing and framing of the decision were not simply a technical adjustment, and noted that Treasury had previously committed not to “manipulate the market for its own short-term benefit.” We would treat that critique as a fair one to keep in mind alongside Treasury’s own characterization of these operations as routine liquidity support.
The Bigger Read: Why Long Yields Are Rising
Given everything above, it is worth stepping back and asking directly what the rise in long-term Treasury yields represents, since the headlines have offered two extreme readings: either markets have lost confidence in U.S. government debt, or the Treasury has tried and failed to cap yields outright. We do not find either reading persuasive. A more straightforward explanation is that long yields are adjusting to stronger nominal growth, a still-large fiscal deficit, a wave of AI-related capital spending, and shifting liquidity conditions, four forces that would push term premia higher in almost any period, not only this one.
On the confidence question specifically, we would look to convenience-yield and term-premium measures rather than the level of yields alone, since a genuine loss of confidence in Treasury debt should show up there first, in investors demanding a much larger premium to hold it, rather than in yields simply drifting higher alongside stronger growth. We are not aware of measures currently pointing to that kind of breakdown. Michael Howell of CrossBorder Capital, in his August 23 Capital Wars research note, made this same point, arguing that convenience-yield and term-premium data continue to show solid demand for U.S. debt even as headline yields rise, and we think that is the right lens to apply before reaching for a “loss of confidence” narrative.
This reframes the buyback and reserve-management programs described above in a useful way. Treasury’s own stated purpose for the buyback program is to improve liquidity and reduce volatility in older, thinly traded securities, not to change the overall supply of long-term debt enough to move its price, and the scale figures in Figure 1 make clear it could not plausibly do the latter on its own. Howell has described this distinction as “yield volatility control” rather than “yield curve control,” a term that implies an explicit ceiling on yields that Treasury has not attempted. We find that a useful, and more accurate, label for what is actually happening.
The Federal Reserve’s own posture fits the same pattern. Fed researchers have published ongoing work on the minimum, or “ample,” level of bank reserves needed to avoid the kind of repo market strain seen in 2019 and again in late 2025, and policy under Chair Warsh has leaned toward keeping reserves at or above that estimated threshold rather than resisting higher long-term yields directly. Warsh has been explicit about this philosophy in his own public remarks, saying that markets are “learning to play the ball, not the referee,” and that “while at some level, we haven’t done much in 42 days, the markets have done quite a bit,” referring to the tightening effect of higher long yields doing work the Fed would otherwise have needed to do through rate hikes. Read together, this suggests policymakers are tolerating a steeper curve and higher long yields as a partial substitute for further rate increases, while using buybacks and reserve management underneath that adjustment to keep the plumbing functioning smoothly, not to suppress the adjustment itself.
The fiscal backdrop supports this reading of scale. The federal deficit is running near 6 percent of GDP this fiscal year, per the Congressional Budget Office’s February projection of a $1.9 trillion FY2026 deficit, and a large wave of AI-related capital spending has added to nominal growth and financing needs at the same time. Howell’s research frames the resulting pressure as a gap between long-term yields and underlying global nominal growth, and argues such gaps have historically proven temporary, closing over a period of years rather than persisting indefinitely, pointing to the period after 2012 and Japan’s own experience with yield curve control as precedents for how long a shortfall like this can run before it closes. We would treat that as a reasonable, evidence-based framework rather than a precise timing signal for when today’s gap resolves. Put together, our read is that current policy is not trying to suppress yields outright, it is trying to let them rise in an orderly way while preventing the kind of disorderly market functioning that prompted the original buyback program. That is a more benign, if still closely worth monitoring, interpretation than either the “loss of confidence” or “failed yield curve control” framings we opened this section with.
Energy, Inflation, and an Unsettled Strait of Hormuz
The military conflict between the United States and Iran, and its effect on shipping through the Strait of Hormuz, has continued through 2026 and remains unresolved as of this writing. Access through the strait has been contested for months; a negotiated window between the two sides recently lapsed, and reporting in mid-August described continued attacks on shipping alongside U.S. statements that the strait is “open and operating.” We do not think it is useful, or appropriate for a piece like this, to speculate on the political motivation behind the timing of any of these developments. What matters for portfolios is the market effect, and that effect has been significant.
The clearest evidence is in the diesel market. The 3-2-1 crack spread, a standard measure of refining margins that approximates the premium refiners earn turning crude oil into diesel and gasoline, set a record of $102.20 per barrel on August 17, the first time it closed above $100. That exceeds the prior record of roughly $89 set in October 2022 and an interim 2026 high near $97 to $98 set in March. The causes are more about refined-product supply than crude oil itself: disrupted flows through the strait, Ukrainian strikes on Russian refining capacity and Russia’s resulting export restrictions, attacks on refining infrastructure elsewhere in the region, and U.S. diesel inventories that have fallen to their lowest level since 1996.
Notably, crude oil itself has been comparatively contained, trading in the mid-$80s per barrel, well below the levels that would typically accompany a crack spread at these levels. That distinction matters: it suggests the pressure is concentrated in refining and distribution rather than in the crude market broadly, though diesel costs still flow into trucking, shipping, and a wide range of input costs, typically with a lag of several weeks before showing up fully in inflation data. This leaves the new Federal Reserve chair with a genuine dilemma: energy-driven price pressure argues for caution on rate cuts, while signs of a softening labor market argue for support. Some forecasters now expect the Fed to resume rate increases later this year if energy pressure broadens; others expect the Fed to hold steady and treat the shock as temporary. We do not think this is resolved either way, and it argues for continued caution on inflation-sensitive positioning.
Gold, the Dollar, and the Bigger Picture
Gold has continued its multi-year advance, trading near $4,667 per ounce as of this week, up from roughly $2,500 two years ago and up sharply, by more than 15 percent, in just the past month. Over the same two-year period, the ICE U.S. Dollar Index has drifted lower and now sits near the low end of its 52-week range. Neither move has been a straight line, and neither has been sudden; both reflect a gradual, multi-year rebalancing rather than a single catalyst.
The structural drivers behind gold’s re-emergence as a reserve asset are well documented. Global central banks now hold roughly 36,200 tonnes of gold, about a fifth of official reserves, up from 15 percent at the end of 2023, following three consecutive years of purchases exceeding 1,000 tonnes. Over the same period, the dollar’s share of global reserves has slipped to roughly 57.8 percent. This is consistent with what we described in our 2026 outlook: a world that is not abandoning the dollar, but is deliberately holding a somewhat smaller share of its reserves in any single currency, gold included among the beneficiaries of that shift.
The dollar’s near-term path is genuinely two-sided, and we want to be direct about that rather than picking the narrative that fits neatly with the gold story. On one hand, continued reserve diversification and unresolved questions about fiscal sustainability argue for a structurally softer dollar over time. On the other hand, because oil and the large majority of global trade are priced in dollars, sustained energy demand tends to keep demand for dollars elevated as well, and past escalations in the Iran conflict have at times coincided with a firmer, not weaker, dollar as capital sought safety and liquidity. Our base case is that the structural, multi-year pressure on the dollar’s reserve share persists, while near-term moves stay sensitive to the energy and Fed headlines described above. We would treat a period of dollar strength as a shorter-term move within that longer trend rather than a reversal of it.
There is a related, more speculative argument worth naming directly, since it runs through the title of this piece. Part of the market commentary we track has raised the possibility that an unresolved Strait of Hormuz, rather than a swift and complete resolution, works in the dollar’s favor: continued uncertainty over oil flows keeps global demand for dollars and dollar-denominated debt elevated, since oil and most of world trade are priced in dollars, an arrangement long described as the United States’ “exorbitant privilege.” The administration’s own December 2025 National Security Strategy states a goal of “ensuring the dollar’s future as the world’s reserve currency,” though it frames that goal around deepening U.S. capital markets rather than the Gulf, and separately names keeping the Strait of Hormuz open, not closed, as a “core interest.” The stated policy rationale therefore runs against a closure-benefits-the-dollar reading, even as unresolved conflict has in practice coincided with dollar strength through the safe-haven flows described above. A more durable version of the argument, in our view, does not require reading intent into any single actor’s decisions: the United States is now a net energy exporter rather than a net importer, per the same strategy document, so higher and more volatile energy prices mechanically increase transactional demand for dollars while also directing more of the associated revenue to U.S. producers than they would have a decade ago, a genuine, if partial, offset to the inflationary drag of an energy shock. We would treat this as context for why the dollar has more two-way support than a simple “falling reserve share” narrative implies, not as a claim about why the conflict has gone unresolved, or a forecast of how it ends.
One more note on timing: fiscal announcements, diplomatic timelines, and geopolitical de-escalation have a well-documented tendency, across administrations of both parties, to cluster around election calendars. With the midterms roughly two and a half months away, we would not be surprised to see meaningful movement on the Hormuz situation, tariff policy, or both, revisited in the weeks after the vote. We flag that as a pattern worth watching for positioning purposes, not as a claim about anyone’s motives.
Midterms and Market Volatility
The November midterm elections are now roughly two and a half months away, and we want to be precise about what history actually shows, since the popular narrative on this point is sometimes backwards. Looking at all 31 U.S. midterm elections from 1900 through 2025, the S&P 500 has averaged a modest gain of 2.9 percent in the 12 months before the election, followed by a considerably stronger average gain of 12.4 percent in the 12 months after. Midterm years have also historically carried the largest average intra-year drawdown of the four-year presidential cycle, around 18 percent, but that drawdown has tended to occur in the months leading into the vote, ahead of the recovery that follows.
In other words, the historical pattern is pre-election volatility followed by a rebound, not a sustained decline after the votes are counted. We would caution against treating this as a guarantee. This cycle includes an active energy supply shock feeding into inflation and a Federal Reserve still finding its footing under new leadership, both of which are the kind of variables that can override a seasonal pattern. It is a reasonable base case, not a forecast we would size a portfolio around on its own.
Portfolio Positioning
Given the developments described above, this month brings a modest tilt within our positioning rather than a change in overall posture. From a duration perspective, we prefer to remain shorter than benchmark across our fixed income allocations. That stance is reinforced, not prompted, by this past month’s developments: the structural supply the Treasury must issue across bills, notes, and bonds, and the resulting rise in long-term yields described above, argue for staying underweight duration until that supply and demand picture is better resolved. This is implemented through short-duration Treasury exposure alongside core bond and flexible income allocations, rather than extending duration to capture today’s higher long-end yields. Within equities, we maintain a quality and value orientation, implemented through our value and growth barbell domestically and internationally.
Within that overall balance, we are modestly more constructive in two places this month. First, on monetary-debasement hedges and dollar alternatives: gold, where we already hold a diversifying allocation. Second, on liquidity-sensitive segments of the equity market, including the growth and small-cap sleeves within our domestic barbell, which have historically responded first when financial conditions ease, consistent with the Fed’s reserve-management purchases and Treasury’s own liquidity operations described earlier in this piece. We continue to hold precious metals and managed futures as diversifiers more broadly, positioning we believe is well suited to an environment where a live commodity and geopolitical shock, a Federal Reserve in transition, and a reemergence of positive stock-bond correlation all argue for balance over concentration.
Important Disclosures
Securities are offered through LaSalle St. Securities, LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors, LLC, a Registered Investment Advisor affiliated with LSS. This material has been prepared by LaSalle St. Securities, LLC and/or its affiliated registered investment adviser. As such, the firm and its affiliates have a financial interest in providing investment advisory and brokerage services. This creates a conflict of interest, as the firm or its affiliates may benefit financially if a reader chooses to engage their services. The views expressed may reflect the interests of the firm and its affiliates and should not be viewed or relied upon as independent or impartial research or analysis.
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