Market Recap: August 2026

Market commentary

• The economic backdrop remains consistent with a slow-growth, soft-landing scenario. Although recession risks are lower than they were a year ago, persistent inflationary pressures, widening fiscal deficits, and elevated interest rates continue to pose challenges to the outlook.
• Manufacturing activity and AI-driven capital investment remain bright spots, helping to offset weakness in the housing market and consumer-facing sectors.
• Consumer spending continues to support economic activity but is showing signs of moderation as households contend with weak confidence, higher interest rates, and rising energy costs.
• Housing remains the weakest major sector, as elevated rates continue to weigh on affordability, home sales, and new construction activity.

Select economic and market data

Equities

• The S&P 500 gained 2.72% after back-to-back monthly declines, with strength extending across most major equity markets both in the U.S. and abroad.
• Expectations for sustained higher oil prices amid ongoing Iran-related uncertainty helped Energy outperform in August, while Technology, Materials, and Healthcare also advanced.

Fixed income

• Treasury supply and fiscal concerns remained key market drivers, as persistent federal deficits and ongoing Treasury issuance continued to place upward pressure on bond yields.

Strategic outlook

• Near-term caution toward equities is advisable, given heightened risks from geopolitical instability, trade uncertainty, and the potential for renewed inflationary pressures alongside an economic slowdown.
• Near-average expected returns projected for fixed income with the Fed on pause and rates reflective of economic conditions.
• Above-average volatility is likely given central bank involvement and geopolitical uncertainty.