Week ended August 14, 2026: stocks mixed, bonds weaker

As I pen this on Friday, about the only word I can use to describe the past week is “boring.”  It’s mid-August, so perhaps this should not be a surprise – investors deserve a break anyway.

The market last week

In-line consumer and wholesale inflation data for July in the U.S., released mid-week, triggered a modest “relief rally” in U.S. stocks after a sideways start to the week.  Even so, stocks in the U.S. ended the week mixed, with the small cap Russell 2000 leading gains (+1.1% WoW) and the DJIA recording a loss (-0.6% WoW). European bourses were mostly weaker, breaking a four-week winning streak, while Japanese stocks soared.  U.S. Treasury bond investors found a bit of relief at the short end, but the improvement in yields did not extend to the intermediate or long end of the curve as inflation expectations remained elevated, and the direction-of-travel of monetary policy grows increasingly vague.  Oil prices popped again as the situation between Iran and the U.S. remains far from resolved, with Iran and Oman trying to strike a deal to reopen the Strait of Hormuz while the U.S. turns up the economic pressure on Iran.  In foreign exchange, the focus remains on the Yen.  Support for the Yen has faded, not surprisingly after joint Japanese-U.S. intervention (because this is what usually happens). Gold was better on the week while Bitcoin was lower.

Below is a table that summarises performance of select indices and assets for the past week and YtD2026. More detailed tables can be found at the bottom of the update.

Below are a few things that caught my eye last week.

U.S. inflation in July (CPI and PPI)`

A deviation from expectations regarding the July inflation reads in the U.S. would have added some spice to markets last week, but it was not to be as both CPI and PPI came in more or less bang on what economists were expecting.  Inflation is stabilising but it is not moderating, at least not much.  CPI and PCE remain well above the Fed’s target of 2%/annum.  According to the CME FedWatch Tool, the odds are now around 65% that there will not be an increase in the Fed Funds rate at the September FOMC meeting, although such an increase is still expected before year-end.

The bond market remains the boss, guiding the Fed

Even with in-line inflation data and some mixed to weaker U.S. economic data (see further below), the bond market is guiding the Fed and is telegraphing the risks on the horizon for investors.  The short end of the yield curve responded to last week’s in-line inflation data by coming in slightly, but intermediate and long-term yields actually moved wider, suggesting that investors are far from convinced that inflation is under control.  In fact, the U.S. had to severely pay up last week to successfully sell $25 billion of 30-year US Treasury bonds, which were offered with the highest yield (5.216%) for the US long bond in 25 years.  The high yield reflects both ingrained long-term inflation expectations along with the poor and rapidly deteriorating U.S. fiscal situation, with the U.S. deficit ballooning and the Trump Administration offering no solutions as to how to address this problem aside from throwing fuel on the fire.  This article about last week’s 30-year bond auction from the Committee for Responsible Federal Budget (non-partisan) is worth a read (and it’s short).  Clearly, this is a case of the proverbial can being kicked down the road – it will be the next administration’s problem, whether Democrat or Republican, although it looks like the Republicans will pay for what is perceived to be an affordability crisis during the upcoming mid-term elections.    

Other U.S. economic date: consumer confidence and retail sales

The University of Michigan consumer confidence survey released Friday showed a decline in consumer confidence in the U.S., the first such decline in three months.  Inflation expectations also remain elevated according to the survey.  What concerns investors most –  and certainly should grab the attention of the current administration and Congress – is how people feel about the ability of their earnings to keep pace with inflation (meaning the cost of living) over the next year, as depicted in the graph below from Friday’s consumer confidence survey.

US retail sales in July were also released on Friday, declining the most in one year following a strong 1H2026. 

As usual, the devil is in the details of these reports, so dig deeper if you are interested.

U.K. GDP

GDP in June and for 2Q2026 in the U.K. was better-than-expected, providing some support for the new leadership of PM Andy Burnham.  U.K. government bonds and U.K. stocks have stabilised for now just as we are in the dog days of a very hot summer in the U.K.

What I have done in my portfolio in August so far

Recall that my largest portfolio holding is now CSCO, even after I dumped some shares in late May ($118.31/sh) following the latest gap up in price.  The stock is up 45% YtD, which is astonishing given that the share price was flatlining for years between circa $40/sh and $60/sh.  After this exciting run, the stock’s performance post-earnings was painful for my portfolio, with the shares down 8% WoW.  The decline came even though the company delivered better-than-expected top- and bottom-line results for the most recent quarter, and revised their guidance higher for the next quarter.  However, as we have seen more than once in this earnings cycle, stocks that have increased sharply in price this year on the back of the A.I. boom have been vulnerable even when they serve up amazing results.  Apparently, there are some concerns too about CSCO’s gross margins, although I attribute the performance post-earnings mainly to profit taking. 

Away from CSCO, I have lightened into strength in AMZN, GOOG, AAPL and MSFT since the beginning of the month (having added to GOOG and MSFT post-earnings in July), simply wanting to take some profits following strong post-earnings runs for all three stocks.  All remain core in my portfolio.  I also sold all the shares of Crowdstrike (CRWD) in a family account because the valuation makes TSLA and PLTR look cheap now, a shocking statement.  I believe in cybersecurity in spades, but not by holding onto a stock with a forward P/E ratio of 182x and  PEG of 7.3x.   It was time to say “goodbye” to this one.

I have used some cash to add scraps to SO and JNJ, and to start a position (late July) in TSM.  In a family account, I also started a position in SOXX ETF in late July.  I am thinking about ramping up my hedges (S&P 500 or NASDAQ puts) next week, out to year-end or early 2027.

What’s ahead

I’m not sure there will be much market-moving news during the rest of August as investors take holidays, meaning we are likely to drift sideways.  I have to admit though that I have a slight bias towards drifting lower, not uncommon for me after a run like this one.  The main risk that is hard to gauge is geopolitical, although it appears that the U.S. and Iran have fought to a stalemate for the time being.  We do have NVDA’s earnings on the horizon (Aug 26^th), but I suspect the company will deliver another set of amazing results although investors have largely become accustomed to this (meaning it is already priced in, the stock looks fully valued).  Perhaps overall market risk will increase as we head into the autumn due to growing U.S. political risk, with the mid-term elections set for November growing closer and taking centre stage. How this cycle of elections will turn out is anyone’s guess, although some of the races are likely to be emotional and contentious, stirring up volatility and increasing market risk.  In the meantime, we will get the next round of central bank meetings in the second half of September.

I’m off next week    

Unless something major happens, I intend to not release a weekly update for next week.  I am however working on an article about the investment philosophies of Berkshire Hathaway and Scion Asset Management (Michael Burry), which I hope to release mid-week.

MARKET DATA AND TABLES

Below are detailed tables of key indices and asset prices that have been updated for the past week. 

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