August 2026 Market Review

August was a period that appeared strong in terms of major indices, but a more mixed picture emerged beneath the surface. The S&P 500 gained 2.6%, the Nasdaq 3.9%, and the Dow Jones 1.3%. However, the Russell 2000, representing smaller companies, rose only 0.9%. This indicates that the market rally was limited to a narrow group.

Market Dynamics

Throughout August, high-yield bond spreads narrowed by 25 basis points, and the VIX fell by approximately 6.7%. Two-year bond yields rose by 6 basis points, while ten-year bond yields remained stable at 4.75%. Gold gained approximately 9.7%, and Bitcoin gained approximately 22%. Brent and WTI oil prices finished near their July closing levels despite extreme volatility during the month.

By the end of the month, the probability of a September Fed rate hike rose above 65%. This situation led to rapid market pricing following hawkish remarks by Fed Chairman Kevin Warsh at the Jackson Hole symposium.

Corporate Earnings

The second-quarter earnings season was quite strong. 86% of S&P 500 companies exceeded earnings per share expectations, while 77% met revenue expectations. Blended earnings growth reached 52%. Even excluding Alphabet and Amazon's exceptional investment gains, growth was 33.8%.

NVIDIA's earnings report was the most significant corporate event of the month. The company reported $96.2 billion in revenue and 106% year-over-year growth. Data center revenue increased by 117%, while third-quarter revenue guidance was set around $108 billion. Software companies such as Salesforce and CrowdStrike also revised their forecasts upward, confirming that the AI investment cycle is extending beyond semiconductors.

Weakening Macroeconomic Data

While earnings were strong, macroeconomic data sent worrying signals. Non-farm payrolls fell by 23,000 in July, while the data for the previous two months was revised down by a total of 103,000. Real consumer spending fell to zero on a monthly basis. New home sales dropped 10.5% to 607,000, while consumer confidence fell to 89.4, its lowest level in seven months.

On the inflation front, the PCE price index remained stable at 3.7% year-on-year, while core PCE was at 3.3%. These figures continue to be well above the Fed's 2% target.

September Outlook

Next month will see critical data that will determine market direction. The official employment report to be released on September 4th, inflation data on September 11th, and the FOMC meeting on September 15-16th will be the main focus. Factors that could improve the market outlook include a sustained drop in the ten-year bond yield below 4.60-4.65%, a strengthening Russell 2000, and Brent oil falling below $88-90.

This information is not investment advice. Do your own research.

$NVDA