August 2026 Monthly Review

A Look Back

The above title pays homage to the great Dolly Parton. She recently passed away at the age of 80 and her long music and acting career was one to be cherished. There have been very few entertainers that have balanced the lines of fame and relatability as she did…and she crossed many lines that are usually very difficult to cross. Republicans and Democrats alike sang her praise and I’ve yet to see a negative take on what she accomplished throughout her life and the people that she touched through her generous giving. I picked this title because, like her mother sewing together rags and towels of many colors to get Dolly her coat, the market has many colors from an asset class standpoint that should contribute to overall performance for client investment portfolios. We see it often where last month’s or last year’s losers become winners. August was a strong month for stock performance around the globe. The S&P 500 was up 2.72%, bringing the YTD return to over 13%. The tech-heavy NASDAQ fared even better at 3.99%. Emerging market equities continued their run with a 3.37% gain, marking their YTD return at over 24% and a one-year return nearly 40%! Core bonds bounced back a little in the month but are still negative on the year. Even though the Fed Funds rate has remained unchanged this year, longer-term rates have risen. The two-year U.S. Treasury started 2026 at 3.47% and is now at 4.15%, while the ten-year went from 4.15% to 4.80%. That is a substantial move in the bond world and especially so with nothing happening on the very short end of the yield curve. The Jobs number was just released last week and showed better-than-expected results. American employers added 162,000 jobs in August versus a 65,000 estimate and July was revised from a -23,000 to a positive 21,000. The actual unemployment rate remained unchanged at a historically low 4.1%.

A Look Ahead

What does the last third of 2026 hold for the financial markets? Well, like always, it kind of depends. There are several competing headlines. The Fed has talked about a willingness to raise short-term rates…and that is against a strong desire from the President to lower them. The war with Iran is still not resolved and energy prices continue to rise. (I just paid $6.29 a gallon for diesel fuel!) Inflation remains sticky and a concern. Longer-term interest rates are rising around the globe as real concerns about deficits and the funding of the ever-growing costs of the entire AI trade are realized. Further, almost all the traditional longer-term valuation metrics are stretched and point to stocks being nearer to the over-valued stage than the opposite. However, consumers are still spending…it’s lumpy and the higher-wage earners are doing most of it, but still…We recently trimmed some equity allocations and added some shorter exposure in the bond class, and believe that other asset classes like Energy and Commodities can add value…The colored coat that Dolly sang about has value here.