September 4, 2026
The Market Shrugs Off Bond Market Pressures
The S&P 500 reached an all-time high in August, climbing above 7,800 for the first time. As of this writing, the S&P 500 and Nasdaq are both within 1% of their all-time highs, according to Y Charts data.
The two indexes had their best August since 2021, with the S&P 500 climbing 2.6% and Nasdaq up 3.9%.
Gold rose and the U.S. dollar decreased as trust in U.S. stability sank after the national debt climbed to $40 trillion.
We remain in a healthy bull market with normal bouts of volatility. Overall, current conditions are positive for investors.
Rising interest rates remain the greatest risk to stocks and are likely to provide volatility for the rest of 2026. Long-dated bonds went to levels not seen since 2007. More concerning is that the 10-Year U.S. Treasury touched 4.77%, a 19-month high, according to Bloomberg.
Rising global and domestic rates have been a concern for U.S. Treasury Secretary Scott Bessent, who visited the Charlotte Economics Club this past Wednesday for a speaking engagement. In August the Treasury stepped in to defend the Japanese Yen and put a brake on the interest rate rise in longer dated maturities by increasing Treasury long-term bond buys. The interventionist move was criticized by much of Wall Street.
We believe the bond market is at a temporary moment where many different factors are pushing yields higher. A healthy economy and sticky baseline inflation set the initial foundation, which is now compounded by new inflationary shocks from the war in Iran. Furthermore, massive debt issuance by tech hyperscalers to fund capital expenditures is competing directly with long-dated bonds.
Other sources of volatility in the near-term are a possible Fed hike in September and geopolitical risks from the U.S. – Iran conflict that appears to be escalating.
Stocks have shrugged off most of these risks so far, and for good reason.
The broader economy is growing, supported by consistently low unemployment of 4.1%. The Atlanta Fed’s GDPNow model is projecting real GDP growth of 4.7% in Q3.
Consumers continue to spend as wage growth keeps pace with inflation. While the cumulative impact of higher prices strains low-earners, high-earners and retired boomers are spending aggressively to offset this.
Corporate America is exceptionally healthy, boasting fantastic earnings and wide profit margins. Q2 earnings season concluded with the best results since 2021 with 52% year-over-year growth, according to FactSet.
Furthermore, the massive AI datacenter buildout is actively powering the economy higher. With all these strong fundamentals in place and no signs of a recession in sight, this remains as good an environment as any for investors.
While we remain diligent in looking for cracks in the AI buildout, we are optimistic that it still may be early for this bull market.
The current bull market ranks fifth of the eight bull markets since 1966 in terms of total gains, per Yardeni Research. So, history may be on our side.
