September 25, 2026
Filed under: Market Commentary
Equity markets rebounded in August, again led by technology and AI-related names. Bonds held relatively steady despite rising yields, but are also becoming a temporary drag on portfolio returns.
Here’s where things stood at the end of August:
- S&P 500 (TR): +2.7% in August, +13.1% year-to-date
- Dow Jones Industrial Average (TR): +1.5% in August, +11.8% year-to-date
- Nasdaq-100 (TR): +4.2% in August, +17.1% year-to-date
- MSCI EAFE (Net, USD): +1.99% in August, +13.81% year-to-date
- Bloomberg US Aggregate Bond (TR): +0.39% in August, -0.31% year-to-date
Economic Data & Interest Rates
Headline inflation held steady at 3.4% annualized in August, unchanged from July. Energy prices, especially gasoline, remain the key culprit. Core inflation, which strips out food and energy, ticked up modestly but continued its gradual improvement year-over-year, falling to 2.4%.
Labor growth was strong in August, with 162,000 jobs added after July’s net loss of 23,000. Gains were concentrated in food services and local government education, while the information sector lost jobs. The unemployment rate held steady at 4.1%.
After an uneventful August, The Federal Reserve voted unanimously to raise interest rates on September 16th. This is the first rate hike in three years and brings the benchmark Federal Funds rate to a range of 3.75% to 4%. The move, the first under Chairman Kevin Warsh, reflects the Fed’s acknowledgment that inflation has remained persistently above its 2% target.
The 10-year Treasury yield climbed above 5% in the days surrounding the decision, its highest level in nearly two decades, as investors price in the prospect of further increases.
The average 30-year mortgage rate ended August at 6.66%, and has since climbed toward 7%, the highest level in nearly a year.
Consumer Sentiment
Consumer sentiment declined for the second consecutive month in August, reversing the modest recovery seen in June and July. A resurgence in fuel prices and ongoing trade tensions drove consumers’ near-term outlook lower. Overall sentiment now sits 16% below its level before the Iran conflict began in February, and 13% below a year ago.
Key Takeaways
Equity markets found their footing in August, with the Nasdaq-100 snapping a two-month losing streak and tech names once again leading the way. Nvidia’s blowout earnings affirmed that AI infrastructure spending remains robust — though the broader question of whether those benefits spread beyond a handful of mega-cap names remains an important one to watch heading into year-end. International stocks continued their quiet outperformance, a meaningful reminder of the value of geographic diversification.
Despite rising yields, bonds posted a small gain in August before retreating to begin September. With the Fed now in a tightening cycle, the fixed income picture warrants continued attention.
The Fed’s recent rate hike may not be its last. 16 of the 18 Fed officials projected at least one additional increase before year-end, which would bring the federal-funds rate just above 4%. For clients, the practical effects are most visible in borrowing costs and in bond portfolios, where rising yields continue to create headwinds. Inflation remains the Fed’s priority, and rates will stay higher for longer until there is convincing evidence that price growth is sustainable reverting to the 2% long-term target. For the moment, high-yield money markets will provide an attractive low risk option for cash, but be careful as the trend could change given the mixed economic, financial market and geopolitical signals right now.
As always, if you have questions about your portfolio or want to talk through what any of this means for your financial plan, please don’t hesitate to reach out to your Omega advisor.
SOURCES
https://www.nasdaq.com/articles/august-2026-review-and-outlook
https://www.bls.gov/news.release/pdf/cpi.pdf
https://www.bls.gov/news.release/pdf/empsit.pdf
https://www.sca.isr.umich.edu/
https://fred.stlouisfed.org/series/MORTGAGE30US
https://www.nasdaq.com/articles/july-2026-review-and-outlook
https://www.msci.com/documents/10199/822e3d18-16fb-4d23-9295-11bc9e07b8ba
https://www.bloomberg.com/professional/products/indices/quote/LBUSTRUU:IND
https://www.wsj.com/economy/central-banking/fed-raises-rates-for-first-time-in-three-years-08539fbe?mod=WSJ_home_mediumtopper_pos_1