August 2026 Market Recap

Here are the latest market insights from the Goldman Sachs Wealth Management Investment Strategy Group (ISG). 

Initial hopes for a US-Iran peace deal at the beginning of the month faded as negotiations reached a stalemate. Ship traffic through the Strait of Hormuz remained subdued, while the price of oil (West Texas Intermediate) rose throughout August.

Here’s a recap of what happened in the market and economy.

The markets: robust Q2 earnings

Global equities rebounded in August after July's sell-off, supported by strong Q2 earnings. Meanwhile, the US Treasury's surprise expansion of its bond buyback program moved bonds and the dollar.

The S&P 500 returned 2.7% in August, while MSCI EAFE and MSCI Emerging Markets returned 1.4% and 3.4%, respectively.

In the US where 93% of companies have reported, blended earnings (which combine reported results with consensus estimates for companies yet to report) rose by 51% up from 27% in Q1. Some of this strength reflected strong non-operating gains from equity investments. Even excluding these gains, earnings rose by about 32%, supported by broad-based sales growth and margin expansion across all 11 sectors of the index.

While technology and energy were the main contributors to earnings growth, the strength was not limited to these sectors. Excluding the Magnificent 7 and the information technology sector, earnings still grew by 21%, while the median S&P 500 company delivered earnings growth of 12%, well above the index’s long-term trend earnings growth of 6.5% since World War II.

The US 10-year Treasury yield was up slightly, by around 2 basis points. Despite weaker economic data and the US Treasury announcing it would increase long-dated buybacks, Fed Chair Kevin Warsh struck a hawkish tone in Jackson Hole which pushed yields up at the end of the month.

The US dollar weakened further in August, with the DXY index declining 0.5% after a 1.3% fall in July. The decline was concentrated in the second half of the month, following the Treasury’s decision to increase long-end buybacks but was partly reversed after Warsh delivered more hawkish comments on inflation at Jackson Hole.

The economy: softening activity

In the US, recent activity data have surprised to the downside relative to consensus expectations. Retail sales weakened in July, while the labor market report showed that nonfarm payrolls fell by 23,000, materially below consensus expectations for an 80,000 gain.

However, August’s labor market report printed a fast rate of jobs growth, with nonfarm payrolls increasing 162,000 jobs, comfortably above consensus of 55,000. The latest report eases any downside risks that emerged from July’s negative initial print.

Overall, the latest data are consistent with ISG’s view that the US economy will decelerate modestly in the second half of the year, led by softer consumer spending as tax refunds fade and inflation remains above target.

On the price front, July CPI and PCE were broadly in line with expectations, supporting ISG’s view that inflation should slow in the second half of the year and that the Fed will remain on hold through year-end.

However, risks are skewed toward hikes. Warsh's speech at Jackson Hole suggested that a hike in September is possible if August inflation comes in firmer than expected.

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