August in Review

Summary

• U.S. economy grew 1.5% in the second quarter as stronger consumer spending was partly offset by higher imports.
• Consumer price index rose 0.1% monthly and 3.4% annually, while core CPI eased to 2.5%.
• Payrolls unexpectedly fell by 23,000, unemployment rate dropped to 4.1%, and wage growth slowed to 3.2%.
• Retail sales fell 0.6%, the largest drop since May 2025, and consumer sentiment declined to 51.7 from 55.2.
• S&P 500 rose 2.7% in August, recovering from a mid-month pullback to end near its August record.
• Semiconductors led the mid-month decline due to rising long-term Treasury yields and AI spending concerns before recovering after Nvidia results.
• 86% of companies reported second quarter earnings above estimates with blended earnings growth reaching 52.1%.
• Analysts raised third quarter earnings estimates to 28.2% growth and fourth quarter estimates to 25.8% growth.
• Japanese equities rose 3.4% but ended roughly 2% below their mid-month peak due to global long-end yields and yen pressure.
• South Korean equities rebounded sharply on AI stock recovery, while Chinese equities moved slightly lower on economic weakness signs.
• The two-year Treasury yield rose to 4.34% and the 10-year yield rose to 4.75% as the 30-year yield reached its highest level since 2007.
• Federal debt topped $40 trillion, contributing to a higher term premium amid policy uncertainty.
• The Treasury Department announced plans to double buybacks of 10- to 30-year Treasuries to $4 billion per operation in September.
• Fed Chair Kevin Warsh prioritized price stability, citing 3.7% PCE inflation and stating the Fed must be confident inflation is moving to its objective clearly.
• Traders lifted odds of a September rate hike to roughly 55% after Warsh's comments at Jackson Hole.
• Investment-grade fixed income was flat while high-yield spreads narrowed by 18 basis points.
• Bloomberg U.S. Aggregate Index rose 0.4% and Bloomberg U.S. Corporate High Yield Index rose 1.0%.
• West Texas Intermediate crude oil rose 1.1% to $85.76 per barrel after a ceasefire expired and Strait of Hormuz transits slowed.
• Gold rose 9.7% to end the month at $4,437.38 per ounce as investors sought protection against rising yields, Middle East escalation, and a softer dollar.
• U.S. dollar fell 0.5% over the month against a basket of currencies.
• Bloomberg U.S. 3000 Index returned 2.78% month-to-date, 2.19% quarter-to-date, and 13.54% year-to-date.
• Bloomberg Magnificent 7 Index returned 4.44% month-to-date and 6.60% quarter-to-date.
• MSCI Japan returned 3.35% month-to-date and 4.41% quarter-to-date.
• Bloomberg U.S. Treasury Bills (1-3 Months) returned 0.30% month-to-date and 2.45% year-to-date.
• Bloomberg Corporate High Yield Index returned 0.97% month-to-date and 4.88% year-to-date.
• Bloomberg Commodity Index returned 7.39% month-to-date and 32.06% year-to-date.