August 2026 Market Recap

August felt more unsettled than it turned out to be. Stocks reached a record high mid-month, gave back part of the gain over the following two weeks, and still finished ahead. The S&P 500 rose 2.6% and the Nasdaq climbed 3.9%. Underneath that quiet headline number, three things moved: the bond market grew visibly uneasy about government borrowing, the Federal Reserve signaled it is thinking about raising rates rather than cutting them, and the artificial-intelligence spending cycle proved once again to be very real.

What Actually Happened, In Order

The month opened strongly. Soft inflation readings and a weak July jobs report convinced investors the Fed would stay on hold, and the S&P 500 climbed to a record close of 7,798.99 on August 13 — its high for the month and the year.

From there, the bond market took over. Long-term Treasury yields pushed to levels not seen in nearly two decades as investors demanded more compensation to lend to a government whose debt had just crossed $40 trillion. Higher long-term rates pressured share prices, particularly the expensive technology names that had led the rally. The US Treasury tried to help by doubling the size of its bond buyback program on August 19. The relief lasted roughly one day.

Two events near month-end reset the picture. On August 26, Nvidia reported revenue that more than doubled from a year earlier, reassuring investors that AI-related spending has not peaked. Two days later, new Fed Chair Kevin Warsh used his first Jackson Hole speech to say plainly that inflation remains too high. Markets moved from expecting no change in September to pricing a better-than-even chance of a rate increase.

Where the Returns Came From

Four sectors did nearly all of the work in the S&P 500, each for a specific reason, while the most interest-rate-sensitive corners of the market fell behind.

Trailing 1-month S&P 500 sector returns through August 31, 2026.

• Materials, up 7.5%,  was lifted by gold and copper miners, as gold had its best month since January.
• Energy, up 7.3%,  tracked oil, which remains up roughly 50% for the year. Energy is now the best-performing sector of 2026 by a wide margin.
• Technology, up 7.1%,  was driven by AI infrastructure. Nvidia gained about 10% for the month, Microsoft more than 9%, and memory-chip maker Micron more than 16%.
• Health care, up 5.8%,  owes almost the entire gain to a single event: Moderna's cancer-vaccine trial result on August 19 (more below).

The four sectors that fell — utilities, industrials, real estate and consumer staples — share a common trait. They're the parts of the market most sensitive to interest rates and most reliant on dividend income, and they underperform when long-term yields rise. Utilities lost 4.3%.

The Bond Market Was the Real Story

On August 18, the yield on the 30-year US Treasury bond touched 5.33%, its highest level since June 2007. Short-term yields barely moved that week, so this wasn't about expectations for Fed policy — it was about supply and confidence. Federal debt crossed $40 trillion for the first time in August, July's monthly budget deficit was the largest in more than five years, and large corporate borrowing to fund AI data centers is competing with the government for the same pool of lenders. Foreign holders including the UK, China and Japan all reduced their Treasury holdings in June.

Long-dated government bond yields hit multi-year highs across the developed world in the same week — Japan's 10-year reached a three-decade high, France's 30-year the highest since 2008, and Germany's the highest since 2011. This was a global move, not an American one.

The Treasury responded on August 19 by announcing it would at least double the size of its buyback operations in longer-dated bonds. Yields fell about 10 basis points immediately, then reversed almost entirely within two days as investors judged the program too small to change the underlying arithmetic — roughly $14 billion per quarter against a $32 trillion market. The 10-year Treasury finished August at 4.75%, essentially unchanged for the month but 59 basis points higher than where it started the year.

There's another side to this that gets lost when the headline is a negative bond return. Rising yields reduce the value of bonds already owned, but at the same time they raise the income available on every new dollar invested. A 4.75% ten-year Treasury and a 5.25% thirty-year represent the most income the bond market has offered in close to two decades. For a portfolio that is still adding to bonds, or reinvesting the proceeds of maturing ones, that shift works in your favor rather than against you.

The Federal Reserve Turned Hawkish

The Fed left its policy rate at 3.50% to 3.75% at its July 29 meeting, the fifth consecutive hold. Unusually, all three dissenters wanted toraiserates. Minutes released on August 19 showed the hawkish view ran deeper than the three formal dissents, with "many participants" saying further tightening would likely be needed if inflation did not fall.

New Chair Kevin Warsh removed any remaining ambiguity at Jackson Hole on August 28. He declined to offer forward guidance but was direct on inflation: while summer readings had come in better than expected, he said, they did not tell him that underlying trends had meaningfully improved. If the Fed could not be confident inflation was moving to target "clearly and at sufficient speed," he added, "we have work to do."

Markets repriced immediately. The odds of a September rate increase, as implied by futures, moved from roughly 35% before the speech to about 58% that same day and 66% by August 31. The two-year Treasury yield jumped more than 12 basis points in a single session. Gold and bitcoin both fell, and the dollar posted its largest one-day gain in about a month.

The Economy: Sticky Inflation, a Frozen Labor Market

The combination is awkward. Inflation isn't falling fast enough to satisfy the Fed, and hiring has stalled — yet consumers are still spending and the economy is still growing. That's why the September decision is genuinely uncertain rather than a formality, and why market pricing swung so violently on single data releases all month.

Around the World

August 2026 price return, each index in its own local currency.

China and Japan led. Japanese stocks gained 4.0% on the strength of AI-related manufacturers, and Chinese mainland shares rose 4.6%. Europe was roughly flat, up 0.2%, and the UK slipped 0.4%, held back by higher European bond yields and weakness in luxury goods.

The most volatile market in the world last month was South Korea. Its main index fell 5.8% on August 19, triggering an exchange circuit breaker, then rebounded 5.9% the next day. Korea is heavily concentrated in memory-chip makers Samsung and SK Hynix, which makes it the purest expression of sentiment about AI spending anywhere. When global investors reassess the AI trade, Korea moves first and moves most.

US small companies lagged badly, gaining just 0.9% in August, though they remain the best-performing major US category for the year at 19.1%. Smaller companies carry more floating-rate debt, so they're unusually sensitive to the prospect of higher rates.

Commodities, Gold and the Dollar

Gold  had its strongest month since January, rising 9.6%. The driver wasn't conflict in the Middle East but the bond market — when the Treasury announced its buyback expansion, some investors read it as a sign of strain in government finances and bought gold as a hedge against currency debasement. Gold then fell on Warsh's hawkish speech, because higher interest rates make holding an asset that produces no income more expensive. Despite the strong month, gold is up only 4.0% for the year, because it reached an all-time high near $5,590 in late January and spent the spring falling sharply from it.

Copper  reached an all-time high of $6.77 per pound on August 7, on a combination of US import stockpiling ahead of possible tariffs, supply disruptions in Congo and Chile, and demand from AI data centers and electricity grids.

The dollar  was slightly weaker over the month, touching a near-three-month low in the third week before recovering on the Fed repricing.

Companies in the News

Second-quarter earnings season finished in August, and it produced one pattern worth understanding: strong results alone weren't enough. Investors punished any company whose outlook fell short of an already high bar, even when the quarter itself was excellent.

Nvidia Removed the Doubt About AI Spending — For Now

Nvidia's results on August 26 were the month's most consequential corporate event. Revenue reached $96.2 billion, up 106% from a year earlier and above the roughly $92 billion analysts expected. Its data-center business alone generated $89.0 billion, up 117%, and now accounts for more than 90% of the company's sales. Gross margin held at 75%. Guidance for the current quarter came in at $108 billion, well above expectations.

The significance is broader than one company. A great deal of this year's market return rests on the assumption that large technology firms will keep spending enormous sums on AI computing capacity. Nvidia's results are the clearest available evidence on whether that spending is slowing. In August, the answer was no.

The scale of financial commitment now attached to this build-out deserves plain description. Nvidia disclosed $279 billion of supply and capacity commitments, and has agreed to guarantee up to $105 billion of an OpenAI data-center lease in Ohio. The AI cycle is increasingly financed with debt and guarantees rather than cash on hand, and that changes its risk profile.

Moderna's Single Day

On August 19, Moderna and Merck announced that a personalized cancer vaccine, built from a sample of an individual patient's own tumor and given alongside Merck's Keytruda, succeeded in a Phase 3 melanoma trial of 1,137 patients — the first time a therapy of this kind has worked in a late-stage trial.

Moderna shares closed up 177%, adding about $45 billion of market value in one session, and Merck rose almost 13%. The S&P 500 health care sector gained more than 3% that day and reached a record high. Separately, Revolution Medicines won FDA approval on August 26 for the first broadly RAS-targeted treatment for metastatic pancreatic cancer, which extended median survival to 13.2 months from 6.7 months in its trial.

The Consumer, Seen Through the Retailers

Retail results in August told two consistent stories at once. Value and off-price retailers did well — Ross Stores beat expectations and raised guidance sharply, and Estée Lauder's turnaround delivered a fourth straight beat with 2027 profit guidance well above expectations. Meanwhile Walmart missed on profit despite beating on sales and e-commerce, and flagged rising tariff costs. Target's comparable sales reversed from growth into decline. Foot Locker dragged DICK'S Sporting Goods to its worst single-day share move on record.

One accounting detail is worth knowing, because it will recur. Several retailers, including Abercrombie & Fitch, reported unusually large profits in the quarter that were mostly tariff refunds following a February Supreme Court ruling against the use of emergency powers to impose certain tariffs. Abercrombie earned $4.17 per share against its own guidance of $1.80 to $2.00, but roughly $1.75 of that came from the refund — a one-time item rather than an improvement in the underlying business.

The High Bar: Good Results, Poor Reception

The month's most repeated pattern was a clean beat met with a falling share price, on nothing more than a cautious forward outlook. Marvell Technology raised full-year guidance and reported 37% revenue growth, and fell 7% to 8%. Autodesk beat and raised, and fell on a soft quarterly guide. Intuit, Zoom and Axon all did versions of the same thing. AppLovin fell more than 20% on a 0.6% revenue miss.

What this tells us is less about those specific companies than about the market's overall condition. After a strong run, expectations are high enough that meeting them is no longer sufficient — a normal feature of later-stage bull markets and a reason to expect more single-stock volatility rather than less.

Also Worth Knowing

• Meta  agreed to pay up to $17.1 billion to settle claims from 47 states that Instagram and Facebook were designed to be addictive to minors — the largest state-led settlement of its kind, and effectively a benchmark price for similar cases pending against other platforms.
• Palantir  grew revenue 93% and raised guidance by half a billion dollars.Caterpillar  posted its first quarter above $20 billion of revenue in company history.
• Enterprise software held up.  CrowdStrike, Salesforce and Okta all beat and raised on the same night in late August, suggesting corporate spending on software and security is intact heading into year-end.
• Alibaba  raised more than $3 billion in Hong Kong at a discount to fund AI investment, and reported a 72% drop in profit as that spending bit — a useful reminder that the AI build-out costs real money before it earns any.

The World Beyond Markets

Geopolitics has been an economic story all year rather than a background one. The conflict in the Middle East is the reason gasoline costs roughly a dollar more per gallon than it did last summer, and part of the reason inflation has been slow to come down. Trade policy is now a second, separate source of cost pressure.

The Middle East and the Strait of Hormuz

The conflict that began in late February has now run six months. The core economic issue is the Strait of Hormuz, the narrow shipping channel through which a large share of the world's seaborne oil normally passes. Traffic through it has been sharply reduced for most of 2026, and every headline suggesting the strait might reopen or close further has moved oil prices during the month.

August brought movement in both directions. Late in the month, Iran and Oman reached a revenue-sharing agreement covering a new shipping route — the first concrete diplomatic step in months — and oil fell for three consecutive sessions on the news. Goldman Sachs estimated Persian Gulf crude exports had recovered to roughly two-thirds of pre-conflict levels. Then on August 30, US forces struck Iranian rocket launchers near the strait, and oil jumped again before giving back most of the move.

The practical effect on households is visible at the pump. US regular gasoline averaged $4.085 per gallon on August 24, roughly 94 cents higher than a year earlier. Energy prices are up 14.7% over twelve months and are the single largest contributor to inflation running above the Fed's target.

Trade: A New Front With Canada

After talks collapsed over the weekend of August 22 and 23, the United States imposed 50% tariffs on roughly $20 billion of Canadian goods. Canada has since confirmed retaliatory tariffs on more than 700 US products, effective September 8. Washington is separately moving toward a 7.5% tariff on Chinese goods framed around industrial overcapacity, timed to land ahead of a scheduled Xi-Trump summit on September 24.

Why this matters for portfolios rather than politics: tariffs are a cost, and companies are now saying so out loud. Walmart's chief financial officer told investors in August that tariff-related costs are "continuing to drift upwards." That shows up as either thinner corporate profit margins or higher shelf prices, and in practice, some of both.

Russia and Ukraine

The war escalated in August. Moscow concluded that negotiations had stalled and intensified strikes — a drone attack near Kyiv on August 29 killed 38 people, the deadliest single incident of the year. Ukraine, in turn, ran its largest campaign yet against Russian oil refineries and export terminals. The market-relevant point is narrow but real: damage to Russian refining capacity removes supply from a market already tight because of the Middle East, which has helped keep a floor under fuel prices.

Elsewhere

• An outbreak worth knowing about.  An Ebola-family outbreak in the Democratic Republic of Congo has become the largest ever recorded, with roughly 5,800 confirmed cases, 2,800 deaths, and a fatality rate near 48%. It has received little attention relative to its severity. We mention it because it's the most consequential humanitarian story of the month, not because it carries a market implication.
• Central bank independence.  The administration renewed its effort to remove Fed Governor Lisa Cook. This is worth watching not for its own sake but because the credibility of the Fed's independence is part of what long-term bond investors are pricing.
• South Korea raised interest rates  for a second consecutive meeting, an unusual move driven by an AI-led semiconductor boom feeding through to domestic inflation.

What We're Watching

Five things will shape the next few months. None of these are predictions — they're the questions we're tracking, and the reasons we're positioned the way we are.

1. The Federal Reserve Meets September 15 and 16

This is the clearest near-term event. Futures markets put the odds of a rate increase at roughly 66% as of the end of August, and some forecasters now expect two increases before year-end. The August inflation report on September 10 is the last major data point before the decision. A hike would matter most for bonds, dividend-paying stocks, and anything highly valued on future growth.

2. The Long End of the Bond Market

The 30-year Treasury yield reaching a 19-year high wasn't about Fed policy. It reflects federal debt above $40 trillion, heavy issuance, and competition from corporate borrowing to fund AI infrastructure. This is a slower-moving structural issue than a rate decision, and it affects mortgage rates, corporate borrowing costs, and the relative appeal of bonds against stocks. We're watching whether the Treasury's buyback program — and its willingness to fund it from cash rather than new borrowing — makes any durable difference.

3. Oil and the Strait of Hormuz

Energy is the largest single reason inflation is above target. The agreement between Iran and Oman is genuine progress, but the strait isn't reopened and the underlying conflict is unresolved. Meaningful de-escalation would take pressure off inflation and, indirectly, off the Fed. Further escalation would do the opposite. This is the biggest true unknown on the list.

4. Trade Policy on Two Fronts

Canada's retaliatory tariffs take effect September 8. A proposed 7.5% US tariff on Chinese goods is expected ahead of the September 24 Xi-Trump summit. Tariffs raise costs, and companies are already telling us those costs are still rising. Watch corporate profit margins in third-quarter reporting for the answer to who ends up absorbing them.

5. Concentration in the Index Itself

Technology alone now accounts for 38.1% of the S&P 500, and the ten largest companies account for 37.9% of it. Nvidia and Apple alone are more than 15%. A broad US index fund is therefore considerably less diversified than it was a decade ago, and its returns are increasingly tied to one theme. That has worked well for two years. It's also the main reason we continue to hold international equities, smaller companies and other asset classes alongside US large caps, even in periods when they lag.

How We're Thinking About It

August is a good illustration of why we don't build portfolios around forecasts. At mid-month, soft inflation data had convinced the market the Fed was finished raising rates. Two weeks later, the same market priced a two-in-three chance of a rate increase. Nothing about the underlying economy changed that much — the interpretation did.

What we can do is build portfolios designed to withstand a range of outcomes rather than a single one — diversified across geographies and asset classes, with bond maturities and equity exposures matched to an investor's own time horizon and spending needs. Those details differ from one person to the next, which is why nothing above is a recommendation. If anything in this recap raises a question about your own situation,we would welcome the conversation  —reach out to our teamany time.

Important Disclosures

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