August reinforced the idea that strong markets do not depend on a flawless environment. Uncertainty persisted around oil prices, Federal Reserve policy, new tariffs affecting global trade, and interest rates sitting at their highest levels in decades. Yet, a number of positive factors pushed broad market indices upward.

The key lesson for investors is that short-term challenges are a natural feature of markets. Rather than reacting to each development, history suggests that portfolios built around long-term financial goals offer the best path to financial success. With that in mind, here is a look at what shaped markets in August and what investors should consider 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 Treasury yields remain near their highest levels in nearly two decades

One of the most defining characteristics of the current investment environment is that interest rates have stayed elevated longer than many anticipated. The 30-year Treasury yield briefly exceeded 5.3% in August, a level not seen in nearly 20 years. The 10-year Treasury yield, hovering around 4.8%, is also near its recent peak.¹ While interest rates can appear technical in nature, they both influence and reflect broader economic conditions.

Higher rates are often viewed as a headwind for markets, but the reasons behind rate increases matter considerably. While inflation was the primary driver of higher rates in prior years, more recent increases have been linked to improvements in “real yields.” This means that inflation-adjusted yields have risen, reflecting a fundamentally healthy economy supported by strong corporate earnings. Over the long run, this is a constructive signal for market health, which helps explain why interest rates and equity markets are both near elevated levels simultaneously.

For long-term investors, higher rates also present income opportunities across bond holdings. That said, rising rates put downward pressure on the prices of existing bonds, which is why major bond indices such as the Bloomberg U.S. Aggregate Bond Index have remained relatively flat this year. Interpreting rising rates in the context of a well-balanced portfolio and individual financial goals remains important.

Inflation, however, remains above the levels that consumers and policymakers prefer. The headline Personal Consumption Expenditures Price Index showed inflation 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

Broad-based earnings growth is supporting the market rally

The S&P 500 reached new all-time highs in August, driven largely by strong corporate earnings. Second quarter results came in well above expectations across a wide range of sectors, and consensus estimates now anticipate S&P 500 earnings reaching $349 per share by year-end. Forecasts also call for earnings-per-share growth of 15% in each of the next two years, well above the historical average of 7%.⁴

While forecasts are subject to change, current estimates reflect growth driven by AI infrastructure buildouts, higher oil prices, and healthy expansion across sectors. Ten of the eleven S&P 500 sectors reported year-over-year earnings growth, with nine of those reporting double-digit percentage gains. This breadth of growth suggests that broad economic activity, not just a handful of large companies, is contributing to overall corporate profitability.⁵

Strong earnings are one reason that stock market valuations have remained relatively stable over the past year. The S&P 500 price-to-earnings ratio has hovered around 20x, above the historical average of 16x, but an improvement from recent peaks. While valuations are not reliable short-term predictors of market direction, they serve as meaningful guides for long-term asset allocation. In an environment of elevated valuations, maintaining balance across sectors, asset classes, and geographies is especially important.

Trade policy continues to create uncertainty for global markets

Trade policy was back in the spotlight in August as tensions with key trading partners, including Canada, escalated. After last year’s “Liberation Day” tariffs were ruled illegal by the Supreme Court in February, new tariffs were put in place under different legal frameworks, such as Section 301 of the Trade Act of 1974. Those tariffs have since expired, and additional ones have been implemented under separate trade laws, each governed by its own set of rules. At the same time, the government is now 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 materialized. Companies have largely adapted their supply chains, revised pricing strategies, and managed costs in response to these tariffs, which has dampened the inflationary effect of higher intermediate prices. Even so, tariffs are likely to remain a source of uncertainty for global markets in the years ahead.

The bottom line? August highlighted the value of staying balanced and avoiding overreactions to market headlines. Strong corporate earnings and attractive bond yields continue to provide meaningful support for long-term portfolios, even amid periods of volatility.

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.