August showed once again that markets can perform well even when the environment is not perfect. Uncertainty continues around oil prices, Federal Reserve policy, new tariffs affecting global trade, and interest rates that remain near their highest levels in decades. Even so, many positive factors pushed broad market indices higher during the month.
For investors, the key takeaway is that short-term challenges are a normal part of investing. Rather than trying to react to every new headline, history shows that portfolios built around long-term goals offer the best chance of financial success. With that in mind, here is a look at what moved markets in August and what investors should keep in mind going forward.
Key Market and Economic Highlights for August
• The S&P 500, Nasdaq, and Dow Jones Industrial Average rose 2.6%, 3.9%, and 1.3%, respectively, in August. Year-to-date, they have gained 12.3%, 13.5%, and 10.7%, respectively.
• Volatility, as measured by the CBOE VIX index, dropped below the long-term average, ending the month at 16 after climbing as high as 21 the previous month.
• International developed markets returned 1.8% based on the MSCI EAFE Index in U.S. dollar terms, while emerging markets returned 3.2% based on the MSCI EM Index.
• The 30-year Treasury yield reached its highest level since 2007, closing the month at 5.24%. The 10-year Treasury yield ended the month at 4.75%. The Bloomberg U.S. Aggregate Bond Index returned 0.4% for the month.
• Oil prices hovered in a range in August after climbing the previous month. Brent crude closed the month at $90.68 per barrel and WTI near $86.27 per barrel.
• The U.S. Dollar Index fell to 99.43 at the end of August. Gold ended the month at $4,437.38 per ounce while silver rose to $66.58 per ounce.
• The revision to second quarter GDP remained unchanged at an annual rate of 1.5%.
• The July jobs report missed expectations with a decline of -23,000 in payrolls compared to a forecasted gain of 80,000. Unemployment fell slightly to 4.1%.
Long-term interest rates remain near their highest levels in decades
One of the most notable features of today’s investment environment is that interest rates have stayed higher than many people expected. The 30-year Treasury yield briefly rose above 5.3% in August, a level not seen in nearly 20 years. The 10-year Treasury yield, at around 4.8%, is also close to its recent high.1 While interest rates can sound like a technical topic, they both affect and reflect the overall health of the economy.
Higher interest rates are often seen as a negative for markets, but the reason rates are rising matters a great deal. While inflation pushed rates higher over the past several years, more recent increases have been driven by improvements in “real yields.” Real yields are bond yields after adjusting for inflation, meaning that inflation-adjusted returns on bonds have improved. This reflects a healthy economy, supported in part by strong corporate earnings. Over the long run, this is a positive sign for the market, which helps explain why both interest rates and stock prices are near their highs at the same time.
Higher rates can also benefit long-term investors by creating more income from bond investments. That said, rising rates push down the prices of existing bonds. This has kept major bond indices, such as the Bloomberg U.S. Aggregate Bond Index, roughly flat this year. It is important to think about rising rates in the context of a well-balanced portfolio and in relation to your personal financial goals.
Inflation still remains higher than consumers and policymakers would like. The headline Personal Consumption Expenditures Price Index showed that inflation stood at 3.7% year-over-year in July, while core PCE rose 3.3%, both well above the Fed’s 2% target.2 At the Fed’s annual Jackson Hole symposium in late August, Fed Chair Kevin Warsh signaled that a rate hike could arrive sooner. As a result, markets are now pricing in at least one rate hike this year, and possibly two by early next year.3
Corporate earnings growth is broad and widespread across sectors
The S&P 500 reached new all-time highs in August, driven largely by strong corporate earnings. Results for the second quarter came in well above expectations across a wide range of sectors. Analysts now expect S&P 500 earnings to reach $349 per share by year-end, with earnings-per-share growth of 15% expected in each of the next two years. That is well above the historical average of 7%.4
While forecasts can always change, current projections reflect growth driven by investment in artificial intelligence infrastructure, higher oil prices, and healthy activity across many parts of the economy. Ten of the eleven S&P 500 sectors reported year-over-year earnings growth, with nine posting double-digit gains. This broad-based strength suggests that the overall economy, not just a small group of large companies, is contributing to corporate profits.5
Strong corporate earnings are one reason that stock market valuations, which measure how expensive stocks are relative to their earnings, have remained steady over the past year. The S&P 500 price-to-earnings ratio has hovered around 20x, which is above the historical average of 16x but an improvement from recent peaks. While valuations do not tell us what the market will do in the short run, they are useful guides for building a long-term investment strategy. In an environment of higher valuations, staying balanced across sectors, asset classes, and regions around the world is important.
Trade policy uncertainty continues to weigh on global markets
Trade policy returned to the headlines in August as tensions with key trading partners such as Canada escalated. After last year’s “Liberation Day” tariffs were ruled to be illegal by the Supreme Court in February, new tariffs were put in place under different laws, including Section 301 of the Trade Act of 1974. Those tariffs have since expired, and newer ones have been introduced under other trade laws, each with their own set of rules. At the same time, the government is refunding the original “reciprocal tariffs” to businesses, with $129 billion already accepted for processing by U.S. Customs and Border Protection.6
As has been the case since early last year, the worst-case outcomes that many investors and economists feared have not come to pass. This is largely because companies have adapted their supply chains, adjusted how they price their products, and managed costs in response to these tariffs, which has softened the impact on inflation from higher costs. Even so, tariffs will likely remain a source of uncertainty for global markets in the years ahead.
The bottom line? August demonstrated the importance of staying balanced and not overreacting to headlines. Despite periods of volatility, strong corporate earnings and attractive bond yields continue to support long-term portfolios.
References
1. https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics
2. https://www.bea.gov/news/2026/personal-income-and-outlays-july-2026
3. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
4. Clearnomics research and LSEG data as of August 31, 2026
5. https://insight.factset.com/sp-500-earnings-season-update-august-7-2026
6. https://www.cbp.gov/trade/programs-administration/trade-remedies/ieepa-duty-refunds
Index Descriptions
S&P 500
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Dow Jones
The Dow Jones Industrial Average consists of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
NASDAQ
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
MSCI Emerging Markets Index
The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia. The MSCI EM Index consists of the following emerging market country indices: Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa, Turkey, United Arab Emirates, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.
MSCI EAFE Index
The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.
Bloomberg US Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.
DXY
The DXY is a U.S. dollar index based on a basket of currencies, including the Euro, Yen, Pound, Canadian Dollar, Swedish Krona and Swiss Franc.
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