Market Review 24th August 2026

Everything you need to know, Simplified!

Higher yields, stronger earnings and a broadening AI opportunity

Summary

• Bond markets remained under pressure as heavy government borrowing, sticky inflation risks and the scale of AI-related capital spending pushed long-dated yields higher

• US Treasury Secretary Scott Bessent announced that buybacks of 10- to 30-year Treasuries would rise from a maximum of US$2bn to US$4bn or more per operation from September, but the move was viewed mainly as support for market functioning rather than a change in the direction of yields

• Central bank risks remained finely balanced; this week’s discussion continued to focus on whether earlier evidence of easing US inflation was sufficient to justify patience, or whether resilient labour demand, firm underlying consumer activity and ongoing commodity-related price pressures would keep further tightening in play

• Equities were supported by strong earnings momentum and improving breadth; forward earnings for US equities have risen 24.9% year-to-date versus a 12.1% gain in the index, pulling the forward P/E multiple lower despite index highs – earnings strength has broadened to include a much wider section of global markets

• AI remained central to the market debate, supporting productivity and margins but also increasing scrutiny of infrastructure funding, supply-chain capacity and whether leading beneficiaries can continue to exceed elevated earnings expectations

• Japan highlighted the global bond market challenge, with inflation data released on Friday showing headline CPI rising to 1.9% year-on-year in July, core CPI increasing to 1.8%, and core-core CPI also reaching 1.9%, increasing pressure on the Bank of Japan as yen weakness continues to feed imported price pressures

• Japan also highlighted the broadening opportunity set, reflecting the continued expansion of investment themes beyond initial beneficiaries of the AI cycle.

---

Market Review

Bond market pressure: supply, inflation and capital demand weigh on yields

Bond markets were again the main source of macro pressure this week. Long-dated yields rose as investors weighed the combined effect of large government funding needs, inflation risks linked to energy and commodity markets, and substantial private-sector investment in AI-related infrastructure. Together, these factors have increased competition for capital and made investors less willing to hold longer-maturity bonds without additional return. The US Treasury’s plan to increase purchases of older long-dated bonds helped calm trading conditions briefly, but does little to solve longer term concerns around debt sustainability.

US Treasury Secretary Scott Bessent has been consistent in his actions in recent weeks, showing little hesitation to intervene in support of the long end of the US Treasury market. His intervention in Japan at the beginning of August was the first joint US-Japanese intervention in over 15 years. By buying yen in euros rather than dollars, Bessent sent a clear signal that he is concerned about the impact of possible mass sale of US dollar denominated securities on the long end of the US Treasury market. This week’s intervention does nothing to reassure investors that the situation is in any way improved.

Equities: earnings strength supports the market

Equities were supported by another strong earnings season, with the notable feature being that earnings expectations have risen faster than share prices. Forward earnings for US Equities have increased materially year-to-date, outpacing the index and pulling the forward multiple lower even as the market has reached new highs. This means valuations have become less demanding than they were at the start of the year. The rally has also broadened beyond the largest technology companies, with stronger performance from the wider market and record forward earnings across large, mid and small caps. This breadth makes the earnings backdrop more durable than a simple mega-cap technology story.

Valuation is therefore less stretched than the index level might suggest. The premium attached to the largest technology companies has narrowed, while mid and small caps remain cheaper and have participated more fully in the rally. Technology valuations also look more grounded in earnings delivery than in multiple expansion. The key offset is the bond market: as Treasury yields move toward the top of their recent range, the comparison with equity earnings yields becomes more relevant. For now, rapid earnings growth is helping equities absorb that pressure, but the cushion would narrow if yields kept rising or earnings momentum faded.

Japan: policy pressure and AI-related opportunities

Japan is once again providing insight into a range of more global policy and corporate challenges. Inflation accelerated again in July as higher energy and commodity costs fed through into consumer goods, while yen weakness kept imported inflation in focus. This has increased speculation that the Bank of Japan may raise rates again as soon as September, particularly after earlier currency intervention only temporarily stabilised the yen. Japanese equities continue to benefit from improving earnings, revenues and margins, but currency weakness has diluted returns for overseas investors. More broadly, Japan reinforces the message from global bond markets: where fiscal policy is loose, inflation remains sensitive to commodities and central banks look behind the curve, investors are demanding more compensation to hold long-dated debt.

Japan continues to have meaningful exposure to the possible future beneficiaries of AI-related investment, lying beyond the most visible technology names in US and Emerging Market indices. It extends across the supply chain, including semiconductor production equipment, specialist materials, power components, data-centre infrastructure, electricity supply and grid equipment. As the cycle matures, the market is likely to focus less exclusively on the early winners and more on the practical constraints that determine whether capacity can keep expanding.

Despite current market exuberance and a clearly strong earnings environment, valuation discipline remains essential. Treating AI as a broad long-term theme rather than a single trade should help investors to avoid the worst of the hyperbole. Not all companies with exposure to the theme will generate attractive returns over the long-run and looking beyond the most ‘obvious’ beneficiaries of the AI story is likely to yield better results at this point in the story.

---

The week ahead

Tuesday 25 August: US consumer confidence and new home sales

Our view: Consumer confidence is expected to edge down to 90.3 from 90.8, while new home sales are expected to fall to 620k from 628k. This would point to some moderation in household confidence and rate-sensitive housing activity.

Wednesday 26 August: Core PCE, Q2 GDP and durable goods orders

Our view: Core Personal Consumption Expenditures (PCE) is expected to rise 0.2% month-on-month, up from 0.1%, while the annual rate is expected to remain at 3.3%. GDP and durable goods are both expected to be broadly unchanged from their prior readings, at 1.5% and 0.5% respectively.

Thursday 27 August: Initial jobless claims and Jackson Hole

Our view: Initial claims are expected to rise slightly. Jackson Hole – an annual gathering of central bankers and economists – will be closely watched for any shifts in central-bank messaging on inflation persistence, fiscal pressures and rates.

---

Your weekly market review was powered by Canaccord Wealth

---

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity. Where investment is made in currencies other than the investor’s base currency, the value of those investments, and any income from them, will be affected by movements in exchange rates. This effect may be unfavourable as well as favourable. Past performance and future forecasts figures are not a reliable indicator of future results.