Week ended Sept 4, 2026: little movement in global markets

This is from the leader of the free world on Friday afternoon, after the stronger-than-expected August U.S. jobs report released Friday morning:

Think what you may about President Trump’s broader agenda, but as far as understanding economic policy, this dude is simply bat-shit crazy.  Moving on……

Markets last week

U.S. stocks bounced around but largely ended the week flattish.  European and Japanese stocks lost ground.  U.S. Treasury yields were higher across the curve, as inflation concerns remain embedded in consumer and investor expectations.  The strong U.S. jobs report released Friday morning indicated broad economic growth in August, but also fuelled further inflation concerns and raised the probability of the Fed raising its benchmark interest rate at its next FOMC meeting (Sept 17-18, decision Sept 18). 

Oil ended the week much higher as the Strait of Hormuz remains difficult to navigate when oil gets through at all; the U.S.-Iran conflict continues.  Gas-at-the-pump nationwide in the U.S. prices rose to nearly $4.15/gallon (source AAA here) last week. 

Bitcoin held on to its recent gains, adding 2.5% this week to close at $79,747 on Friday.  Gold prices fell, and the Yen strengthened on renewed expectations of further FX intervention and growing confidence that the Bank of Japan will increase its policy rate 25bps at its next monetary policy meeting on Sept 17-18.  The stronger Yen and expectation of a rate rise weighed on Japanese stocks, which were down 2.5% WoW (but are up over 29% YtD).

The table below is an updated summary of WoW and YtD performance of select indices and asset classes tracked by EMC.  You can find more detail at the end of this update.

Stocks continue to be resilient……but for how long?

Being bearish for stock investors has proven wrong time and time again since the global economy began to emerge from the Great Financial Crisis in mid / late 2009-10.  As an investor, I realise that I have been a beneficiary of this incredible run because I have stayed well long equities throughout the ups and downs.  Even better, many of my positions have fortunately been in the “right” names.  Still, I just can’t shake the doubts and fears I have about the continued increase in stock prices in the future.  I’m not sure exactly why I feel this way, but I can point to several things that bother me in the aggregate.

• Stock-specific drivers: I do have some doubts about stock-specific drivers, like the timing and impact of A.I. (albeit not about the transformation that A.I. will bring), and the ability of companies to continue to put up numbers like they did during this most recent round of earnings.  Valuations bother me a bit too, certainly in some of the meme-like retail darlings (e.g. TSLA, PLTR, SPCX, etc), although I don’t suppose stock prices generally are too far out of line with earnings so long as companies continue to deliver strong top- and bottom-line growth.

• Macroeconomic and geopolitical concerns:  I could also pin my concerns on macroeconomic issues, like the ongoing conflict between the U.S. and Iran (and its effect on oil prices), U.S. driven tit-for-tat tariffs, erratic U.S. global economic policies more generally, and the upcoming mid-term elections.  The latter especially  rattles me now, and is likely to weight on market sentiment in the coming weeks.  No matter which parties end up controlling the House and Senate, there will be fireworks.  If the Dems win the House or Senate, the Reps will scream “fraud” (in spite of near record-low approval ratings of this administration which will not help the incumbent party).  And if the Reps win, there will likely be another two years of a dysfunctional and contentious U.S. government, and ongoing global and macroeconomic chaos.  

• Higher interest rates:  Both stock specific and macroeconomic risks bother me, as I mentioned in the prior two bullets.  However, what bothers me more than both of these concerns are elevated yields in the global bond market.   It might take time, but rest assured that higher yields will filter through to consumer behaviour and corporate spending decisions.  For example, higher yields mean higher mortgage rates and higher costs of consumer finance, and these are key drivers for a U.S. based economy that is wrapped around consumption.  Should consumption weaken materially, the jobs market and economy will suffer.  Higher borrowing costs also affect companies.  For companies that borrow money in the bank and capital markets, higher interest costs affect their project ROI and capital spending plans.  This in turn creates a drag on bottom-line earnings and growth.   

  
  

• Relative investment alternatives:  Higher bond yields also mean that for investors seeking current returns, bonds are becoming relatively more attractive than stocks.  At some point, it becomes difficult for investors to resist locking in 5%+ rates for the long term, and this could drive some rotation out of equities and into bonds.  (That’s not my view yet, because my readers know I shy away from duration in an environment in which there is no relief in sight for elevated inflation). 

So what is an investor to do?  There’s no magic sauce or easy solution, unless you are so frightened or have such negative conviction that you dump equities and move into cash / cash equivalents (or into debasement assets like gold).   For me, this strategy has more risk than staying long, because the opportunity cost could be severe.  History has shown this is the case for those that try to time markets. 

Investment decisions are personal decisions, and your investment philosophy needs to align with your tolerance for downside events that can result in (mostly unrealised) portfolio markdowns during difficult periods.  If you cannot  sleep at night worrying about mark-downs, then think long and hard about whether you should stay invested in the stock market at all because it will be volatile.  However, in the long-term – depending on how you define that – stocks always go up (see “Stocks – do they always go up” in my blog).

What I’ve been doing

In a nutshell, I haven’t done much the last few weeks aside from buying puts on CRWD and TSLA out to October last Thursday.  I have unloaded about half of the positions since then, very profitable in the first leg for CRWD and less profitable for TSLA.  I still think the same about both – they are insanely over-valued, although I do recognise that there is a retail bid for these names, valuations-be-damned.  Both CRWD and TSLA (especially TSLA) have a certain meme-like status that puts a floor under their price, and makes them prone to gaps up, too, a recipe for disaster for those playing the short side of these names.

What’s ahead?

Monday is Labor Day in the U.S., so stock and bond markets will be closed.  Investors will be focused this coming week on the ECB monetary policy decision on Thursday (ECB expected to raise its policy rates 25bps), and inflation data for August in the U.S. to be released on Thursday (PPI) and Friday (CPI), the last inflation data before the next FOMC meeting.  The University of Michigan Consumer Confidence survey will also be released next Friday. 

As of press time, the CME FedWatch Tool is projecting with 58% probability that the Fed Funds rate will be increased 25bps at upcoming FOMC meeting on September 16^th.

MARKET DATA AND TABLES

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

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