Month in Review
- All major equity markets rose in August, powered higher by one of the stronger earnings seasons in the last 20 years. Growth and Technology stocks rebounded from the volatility in June and July, leading equity markets higher.
- Large cap growth stocks rebounded after the ~5% decline in July, rallying +3.73% in August (Russell 1000 Growth TR Index). AI-related companies posted strong 2Q2026 earnings, pushing overall S&P 500 earnings higher.
- International equity markets also benefitted from stronger earnings growth, as well as the US dollar depreciating. International equities rose +2.57% in August and stand at +17.01% YTD in 2026 (MSCI ACWI Ex-USA NR Index).
- Bond yields continue to trade near 20-year high levels, with short-term bond yields also rising in August following the Federal Reserve’s meeting at Jackson Hole. Despite the increase in yields, the Bloomberg Barclays Aggregate Bond TR Index rose +0.39% in August.
Federal Reserve: “Inflation Running Above Our 2% Target”
The Federal Reserve Board held its annual symposium at Jackson Hole, Wyoming at the end of August. It was closely watched by investors for direction of monetary policy going forward, as inflation heads towards its 6th straight year of being above the Federal Reserve’s 2% target rate.
Fed Chair Kevin Warsh delivered what was regarded by investors as a “hawkish” speech, indicating “the Fed’s predominant focus right now should be on prices (inflation)”. Warsh highlighted the chart below, which shows the breadth of the inflation challenge. Today, 54% of the items in the Fed’s preferred inflation basket had inflation rates greater than 3% year/year, significantly above the 32% average from 2000-2019 (pre-pandemic), but below pandemic highs of 77%. The broadness of price increases was emphasized by Warsh during prepared remarks, not just the overall level of inflation.
Source: Evercore ISI as of 8/30/2026
The reaction by investors was to increase the likelihood of rate hikes in the near-term, which pushed up short-term bond yields. This also weighed on more interest-rate sensitive areas of the equity market (i.e. small caps), as the probability of a 0.25% rate hike in September hit 60% (as of 8/31/2026). For bond investors, the increase in bond yields over the past 5-years does mean there is more cushion to absorb future interest rate increases, in contrast to 2021-2022 time period.
What’s on Deck for September?
- Earnings season will wrap up for the S&P 500, which had a remarkably strong 2Q2026 earning season. Through 8/31/2026, 86% of S&P 500 have reported earnings ahead of estimates, a beat rate significantly ahead of the 10-year average beat rate of 76%. The year/year growth for 2Q2026 reached +52% as of 8/31/2026.
*Past performance is not indicative of future results. The S & P 500 Index is a broad, unmanaged index of 500 of the largest US publicly traded companies and does not reflect the impact of fees, taxes or expenses. Any investment in the S&P 500 or similar indices, like the Russell 1000 and Russell 2000, involves risk, including the potential loss of principal and they do not reflect the costs of investing in an actual portfolio. Investors should consider their individual risk, tolerance, investment objectives, and consult with a financial professional before making investment decisions.