September 1, 2026
Bonus Content: Chicago PMI Fell Off a Cliff. Today’s ISM Will Show If It Spread.
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Chicago PMI Fell Off a Cliff. Today’s ISM Will Show If It Spread.
The single most important number of this trading session prints at 10:00 a.m. ET: the ISM Manufacturing PMI for August. Traders should have an alert set. Here is why the reading matters more than usual today.
Market Snapshot
Equities are navigating a genuinely ambiguous macro picture heading into Tuesday’s open. Last Thursday delivered two conflicting data points from the same corner of the economy. The Chicago Business Barometer came in at 47.1 for August, a 10.5-point collapse from July’s 57.6 and the index’s first contraction reading in four months. The consensus forecast had called for a modest rise to 57.9. The same morning, the University of Michigan’s consumer sentiment index was revised to 51.7 in August, up from a preliminary reading of 51.0. Despite the upward revision, sentiment fell about 6% from July and remained roughly 11% below its year-ago level, reflecting persistent concerns that inflation will remain elevated for the foreseeable future.
Only 8% of consumers expect their income growth to outpace inflation over the next year. That figure is not a soft concern. It is a direct drag on discretionary spending, and it lands while the Fed is weeks from a live policy decision.
Stocks in Focus
Industrials and materials are the sectors most directly exposed to this morning’s ISM release. Any company with significant domestic manufacturing exposure, equipment makers, auto suppliers, chemical producers, faces binary risk at 10:00 a.m. The Chicago PMI’s plunge into contraction puts a hard question to names that rallied on the expansion cycle: was the last seven months of ISM strength real, or was it front-running that is now reversing?
The Setup Into 10:00 a.m.
The national ISM and the Chicago Barometer are not the same survey and do not use identical methodology. ISM itself warns traders not to confuse the national report with regional surveys: the national report reflects the entire U.S., while regional reports contain primarily local data and that regional information is not used in calculating the national result. That distinction matters, but it does not fully neutralize the signal.
In July, the ISM Manufacturing PMI jumped to 55.6 from 53.3, marking the seventh consecutive month of expansion and the strongest headline reading since May 2022. The national ISM is expected to weaken slightly in August. Investors will also be watching the ISM Prices and Employment indices closely. Markets expect the headline index to come in at 55.2 in August, a slight softening from 55.6.
That consensus forecast was built before Chicago crashed 10.5 points. The swing from 57.6 to 47.1 represents a move of 10.5 points. Forecasters who expected stability near 57.9 were not just slightly off, the gap suggests something shifted in the real economy that models failed to capture. A national ISM print that holds above 55 would suggest Chicago was regional noise. One that drops sharply toward or below 50 would be a materially different conversation.
Why the Fed Makes This Urgent
The September FOMC meeting is September 15 to 16, with the rate decision announced on Wednesday, September 16 at 2:00 p.m. ET. The September meeting is one of four each year that include the Summary of Economic Projections and the dot plot of rate forecasts. That means today’s ISM is not just a data point, it is one of the last clean reads on manufacturing health before the Fed publishes its updated rate path.
University of Michigan year-ahead inflation expectations came in at 4.0%, with five-to-ten year expectations at 3.3%. Together, the two prints describe an economy where business activity is shrinking and inflation is refusing to follow. That is the stagflation framing, and it is the worst outcome for the Fed. A strong ISM today complicates it. A weak one confirms it.
The Cheat Sheet
- Top Market Theme: The Chicago PMI collapse put contraction on the table; today’s national ISM either quarantines that signal or spreads it.
- Number to Watch: ISM Manufacturing PMI at 10:00 a.m. ET. Consensus is 55.2. A print below 52 triggers reassessment of industrial names. A print below 50 is a session-moving event.
- Sector to Watch: Industrials. Seven months of expansion-cycle positioning gets stress-tested at 10:00 a.m.
- Biggest Risk: ISM corroborates Chicago, confirming a broad manufacturing turn at exactly the moment the Fed is weighing its September dot plot.
- One Thing to Remember: Chicago PMI is a leading indicator for ISM about as often as it is simply wrong. The key sub-indices, new orders and prices paid, will tell traders more than the headline alone.
