No Landing in Sight
September 8, 2026
August has been characterized by an ongoing focus on inflation, monetary policy, and the path of interest rates, with an uncertain Federal Reserve outlook. Equity markets remained generally constructive, supported by strong earnings and enthusiasm surrounding artificial intelligence. Debt markets are facing ongoing pressure from rising Treasury yields. The interest rate environment has been a defining topic of 2026 thus far. Since the early months of the year (and arguably long before that) interest rates have followed a relatively uncertain path. Most articles about monetary policy that come out seem to include phrases like “soft landing”, “higher for longer”, “disinflationary growth”, “data dependent”. And as it turns out… all those phrases still apply.
The early communication of Federal Reserve Chair Kevin Warsh added another layer of uncertainty. Particularly as investors attempt to assess the Fed’s tolerance for above-target inflation and the potential timing of future policy changes. As of this writing, investors are penciling in rate hikes as early of December of this year, according to Bloomberg’s World Interest Rate Probability function (WIRP). Against this backdrop, markets have remained sensitive to incoming economic data, with inflation continuing to serve as a key determinant of both interest-rate expectations and equity and debt market pricing.
July CPI, released on August 12, showed headline inflation increasing 3.4% year over year, down slightly from 3.5% in June, while core CPI moderated to 2.5%.1 This moderation is encouraging, but numbers have been above the Federal Reserve's 2% objective for more than five years now. This complicates expectations for the future path of monetary policy. Warsh did not shy away from this fact when speaking at the Jackson Hole Symposium last week.2 His remarks reinforced the Fed's focus on returning inflation to target rather than providing investors with a clear roadmap for near-term rate cuts.2 At the symposium, Warsh stated “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”2 Markets subsequently increased the probability assigned to a potential rate hike, according to Bloomberg’s World Interest Rate probability function (WIRP).
As for asset class performances, August did not disappoint. In domestic equity, the divide between the S&P 500 Index and the Nasdaq Index has persisted, but both were able to post strong performances for the month. The S&P 500 finished the month +2.72%, and the NASDAQ index closed out the month +3.99%. In international equities, developed markets returned +2.01% as tracked by the MSCI EAFE Index and emerging markets returned +3.39% as tracked by the MSCI Emerging Markets Index. Despite the ongoing pressures in treasuries, core bonds were able to post positive returns, closing the month +0.39% as tracked by the Bloomberg US Aggregate Unhedged Total Return Index. An ever changing interest rate environment has kept investors engaged, so given circumstances, positive returns across every major asset class is nothing to balk at.
1https://www.bls.gov/news.release/PDF/cpi.PDF
2https://www.federalreserve.gov/newsevents/speech/warsh20260828a.htm
This commentary is provided for informational purposes only and reflects general market observations. It does not constitute individualized investment advice or a recommendation to buy, sell, or hold any security. Past performance is not indicative of future results.
The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
The MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
The MSCI Emerging Markets Index consists of 23 economies including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates. The MSCI is a float-adjusted market capitalization index.
Bloomberg’s U.S. Aggregate Total Return Value Unhedged Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS(agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg's World Interest Rate Probability (WIRP) function is a chart that shows the probability of different interest rates for the US benchmark rate. The chart is based on interest rate caps and floors, as well as options on Treasury futures.
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