August 2026

Insights & Observations

Economic, Public Policy, and Fed Developments

• The past month brought a suite of positive inflation releases. Inflation was expected to have improved in the month of June, and releases met or exceeded expectations. Falling energy prices during what proved to be a temporary lull in Iran hostilities were the main driver, but there were some interesting details as well; in particular, CPI inflation saw an unexpected drop in rental costs, and wireless phone services were one of the larger detractors. The former is independent of energy costs and could be related to net outmigration in the past year. The latter seems more likely to be a lagged effect of higher energy prices in previous months causing providers to drop rates and could be more evidence of energy prices paradoxically helping contain core price pressures.
• The market continues to scrutinize Fed Chair Warsh’s second press conference as it did to the first; the front of the Treasury curve fell while increasing inflation expectations drove longer maturities higher, after Warsh described the sharp jump in the 2yr during his first press conference as the market having “tightened” for the Fed, implying that despite his messaging around inflation the Fed might not follow through with rate hikes.
• Second Quarter GDP report missed expectations, 1.5% vs 2.0%, however this is deceptive; the headline was lowered by net imports and inventory replenishment, and underlying growth appears quite strong. Final sales to private domestic purchasers grew 3.9%, the highest quarterly growth in several years. We believe the economy is on much better footing than headline GDP growth implies.
• President Trump’s temporary Section 122 tariffs expired early the morning of Friday the 24^th and were immediately replaced with new Section 302 unfair trade practice tariffs on 60 countries representing 99% of all US imports, ranging from 10% to 12.5%. The Trump administration tied these to slave labor in national supply chains, but critics argue this was a pretext to replace expiring tariffs. The economic impact is roughly a wash but do return tariffs to the news cycle; additional tariffs have been threatened, and further escalation is likely.
• We also expect further escalation with Iran. After a month of increasing hostilities, August opens with hope for a resumption of talks between the US and Iran. We’re less optimistic; there is no obvious “solution” to the conflict, and we believe this respite is likely to be temporary. This will likely continue pressuring Treasury yields, which have risen significantly since the start of the war.
• Recent weakness in the Japanese yen poses another risk to the Treasury curve; Japanese retail investors are the largest overseas holders of Treasuries, and sharp moves in Japanese yields or currencies have in the past flowed through into Treasury yields as the relative value of unhedged Treasuries for Japanese investors changes. The JCB stepped in on the 27^th with what’s believed to be their largest yen intervention in history, an estimated $53B. For the first time in 15 years, the US Treasury joined them, and Treasury Secretary Bessent has indicated support will continue. This brings its own risks; the sheer size of the intervention suggests it may be difficult to support the yen at these levels, and failure may result in a sudden spike in bond yields globally.
• A new possible source of support for Treasuries has emerged from an unlikely place. As states propose possible state-level wealth taxes, there is a growing consensus amongst accounting firms that US Treasuries would be exempt from such taxes, as they are state tax exempt. If wealth taxes like the one California has proposed start to look likely to pass into law, demand for Treasuries could surge amongst the wealthiest of American investors. 

Sources: Bureau of Labor Statistics, Bureau of Economic Analysis

Equity News and Notes

A Look At The Markets 

• Stock performance was once again mixed in July as the S&P 500 (-0.1%) and Nasdaq (-3.2%) fell for the second straight month, while the Nasdaq 100 briefly traded into correction territory       (-10% or more from the most recent high). The Russell 2000       (-3.1%) snapped a 3-month winning streak leaving the DJIA (+0.3%) as the lone major US average to close higher. A broadening trade that was reignited in June continued into July as the equal-weight S&P 500 (+1.1%) outperformed the market-cap index by 118bps, raising the YTD gap to ~2.8%. Seven of eleven economic sectors were higher on the month, led by Energy (+12.5%) on a +21% gain in WTI crude which essentially reversed June’s -20% decline. Technology and Industrials led declines with each falling more than 3%.
• The conflict in Iran remains a major concern although investors are still largely looking past the geopolitical turmoil. With oil back above $80/barrel and the national average gasoline price up to $4.10/gallon, inflation expectations moved up throughout the month, pressuring bond yields. The long end of the curve sold off with the 30Yr trading to its highest level since 2007 and the 10Yr climbing 27bps to close at 4.73%, its highest point since January 2025.
• But it’s more than just inflation hitting the long end of the curve. Newly minted Fed Chair Warsh has raised the possibility of holding 6 policy meetings per year, down from 8, along with reducing the number of press conferences. He also announced the creation of 5 task forces assigned to look at how the Fed communicates and manages its balance sheet. Uncertainty surrounding the Fed has created some volatility in the bond market which could spill over into equity markets. We are closely monitoring credit spreads for signs of potential stress, although they currently are subdued.
• Artificial intelligence remains a dominant market theme, although investor scrutiny increasingly shifted from the durability of end-market demand to the prospective ROI on elevated capital expenditures. Sharp momentum reversals across semiconductors and memory reflected mounting concerns about hyperscaler spending, intensifying open-source competition, the potential for excess computing capacity, and the pace of memory supply growth. The SOX semiconductor index fell -21% to snap a three-month streak of gains and closed July down 23% from its prior high. Even so, Q2 earnings and management commentary from leading hyperscalers and AI infrastructure providers generally reinforced that AI demand remains resilient and monetization is improving. Earnings reactions for GOOG       (-6.9%) and META (-8%) underscored that markets are unlikely to tolerate weakening or negative free cash flow. The broader debate will center on whether companies can balance sustained aggressive investment with sufficient capital discipline and a credible path to attractive returns. In the meantime, we expect this to remain a rotational market and are encouraged by breadth expanding.
• Q2 earnings season is more than halfway complete with 61% of the S&P 500 reporting by the end of July. Corporate results have been strong across all metrics as the earnings beat rate (86%), revenue beat rate (77%), earnings beat margin (+31.4), and revenue beat margin (+2.9%) are all well above recent averages. The blended earnings growth rate has exploded higher, sitting at +47.4% vs. an expected +23.2% as of 6/30. Like last quarter, significant one-time gains supported certain high-profile results as GOOG and AMZN posted unrealized gains on securities of $98B and $53B, respectively. However, excluding these one-time gains, the S&P 500 earnings growth is still an impressive +28.8%.
• We are mindful that unrealized gains can quickly turn into unrealized losses and that some of these AI investments between companies are circular in nature. But it is difficult to get too bearish when the underlying fundamentals are improving, and earnings are driving valuations lower. The forward S&P 500 P/E multiple as of 7/31 was 19.6x, well below the 5-year average of 19.9x and the nearly 22x forward multiple in place at the start of the year.

Sources: Bloomberg, FactSet

From the Trading Desk

Municipal Markets 

• As geopolitical and Fed messaging concerns took center stage throughout July and added to inflation fears in the market, municipals largely sold off, exceeding the US Treasury market moves and improving entry points for tax-exempt investors.
• Municipal yields experienced double-digit moves higher across the scale with the belly of the curve shifting the most.  Specifically, maturities out to 3 years saw yields move 25bps higher, 5-7yrs rose by 32 and 36bps, respectively, while the 10-15yr part of the curve shifted higher by 42-43bps. Finally, 20-30yr maturities settled in 32-33bps higher on the month.
• The slope of the curve continues to steepen inside of 10 years. The 2s-10s slope is now at 74bps, steeper by 14bps from where it started the month and notably, the very front-end of the curve (2s-5s) is responsible for about 4bps of that. Short-focused strategies can now take advantage of the 9-10bps of additional pickup per year and get more adequately compensated for going out the curve than in the recent past. Steepness along the curve also adds to the total return prospects by increasing the value of the roll down the curve as bonds get closer to their maturity date. 
• Given the sizeable move in yields and the underperformance of munis, ratios gapped considerably wider across the board. Specifically, the 2 and 3yr spots saw their ratios move wider by 5.20 and 3.50% respectively, the 5 and 7yr registered a 4.15-4.25% ratio move, and the 10yr maturity cheapened by 5% relative to its taxable counterpart. Ratio moves in the longer-end of the curve (20 and 30yrs) were more muted, at 1-1.6%.
• According to JP Morgan, July closed the month with gross long-term issuance topping $44.8B, the 3^rd highest July on record, but well behind the record setting July 2025, which saw issuance at $55.8B. Municipal fund subscriptions continued to show strength with Barclays recording approx. $5.6B coming into funds, with inflows being focused on national, ETFs and long-term funds.

Corporate Markets 

• After a selloff in the short end of the UST curve in June, it the was the longer end’s turn in July as the yield curve steepened.  In a full bear steepening fashion, the 20Yr benchmark UST rose 33bps and the long 30Yr bond rose 32bps to 5.27%. This was the highest level the 30Yr has hit since June 2007 and, for perspective, this year’s low was 4.60% back in February. Inflation fears, a lack of Fed action after their recent meeting and continued geopolitical turmoil are pushing hedging costs against a further rise in rates higher, which in turn is pressuring the longer end of the curve. In our view, the Fed is unlikely to move rates in either direction over the remainder of 2026, but the markets are anxiously awaiting what comes out of the Jackson Hole Policy Symposium later this month.
• Investment Grade Corporate bond performance was lackluster in July given rising UST rates and the pressures of an AI issuance boom. Compounding these factors is considerable market uncertainty arising from the Middle East war, a dynamic that is making it challenging for issuers to come to market at times. Nonetheless, the $139.6B that came to market in July was generally well received and finished higher than syndicate expectations. The Technology and Finance sectors remain very active in the primary market, accounting for several jumbo deals completed in July. The “dog days of summer” are showing no signs of living up to their name as $130B of August issuance is expected, the most an August has seen since 2020.
• Market pressures are also weighing on IG spreads. The 4bps OAS move on the month does not tell the whole story as the 80bps OAS on the Bloomberg US IG Corporate index was the highest seen since the beginning of April and slightly above the year-over-year average of 77bps. This modest break in tight spreads and pressure being put on USTs is offering some attractive “all- in” levels. We believe that while there may be smaller moves in spreads, the current range should remain in place for now with room on the upside if geopolitical tensions persist.

Sources: Bloomberg, Bond Buyer, Barclays, JP Morgan, and Lipper Inc.

Financial Planning Perspectives

Prenuptial Agreements: What’s Love Got to Do With It?

Whether due to the recent success of the New York Times #1 bestseller, “Strangers: A Memoir of Marriage,” or all the hype from last month’s marriage of Taylor Swift and Travis Kelce, a great deal of focus has been placed of late on prenuptial/antenuptial agreements, namely when they ought to be utilized and what they should cover. 

Whether due to the recent success of the New York Times #1 bestseller, “Strangers: A Memoir of Marriage,” or all the hype from last month’s marriage of Taylor Swift and Travis Kelce, a great deal of focus has been placed of late on prenuptial/antenuptial agreements, namely when they ought to be utilized and what they should cover. 

Simply put, a prenuptial agreement is “an agreement made before marriage usually to resolve issues of support and property division if the marriage ends in divorce or by the death of a spouse”.¹ While not everyone needs to have the legal protections of a prenuptial agreement, more Americans are now taking advantage of the certainty and stability that these agreements can provide.  Individuals (and their children) who have significant wealth, anticipate receiving a sizable inheritance, have children from a previous marriage, or own a family business are all good candidates. While the thought of signing a prenuptial agreement is disconcerting to some, putting a legal roadmap in place can address a multitude of financial matters including:

• providing insight and clarity as to currently owned assets;
• how to divide property owned prior to and during the marriage;
• treatment of future income and inheritances;
• defining future spousal support obligations; and
• protection from one spouse’s creditors.

So, what makes a prenuptial agreement legally valid? In Massachusetts, the agreement must be in writing, signed voluntarily by both parties, provide full disclosure of assets/debts, and must be fair and reasonable.² It is also highly recommended that each party be represented by their own legal counsel. Furthermore, in Massachusetts, the agreement must not only be fair and reasonable at the time it was executed but also must not be unconscionable at the time a spouse attempts to enforce the agreement.³

The terms and conditions of these arrangements can be wide-ranging and may address virtually any financial matter impacting the marriage. While there are many benefits to having a prenuptial agreement in place, a common concern is how to properly broach the subject. Our recommendation is for parents to introduce the topic with their children well in advance of a potential marriage. As to the parties themselves, the sooner the topic is discussed the better given that drafting and negotiation may take months. This is the case in part due to financial disclosure and legal representation requirements. Additionally, individuals that have a prenuptial agreement, or are considering establishing one, should make certain that the agreement dovetails with their estate plan.

While no one wants to think or plan for an outcome other than a happy, successful marriage, having a properly drafted prenuptial agreement can provide both parties with greater peace of mind and a clear understanding as to the financial ramifications of a possible divorce or death.

For additional information, please see Appleton Wealth Management’s Financial Planning Brief, “Preparing for a Child’s Marriage?  Introduce a Dose of Optimism and Protection“.  Please reach out to your Wealth Manager if you would like to discuss this issue or other planning topics.

Appleton Partners is not a law firm and does not provide legal advice. This material is for informational purposes only. Please consult qualified legal counsel regarding your specific situation

1. Black’s Law Dictionary 1301 (9^th ed. 2009); 2. Massachusetts General Laws Ch. 209, Section 25; 3.  DeMatteo vs. DeMatteo, 436 Mass. 18 (2002)

This commentary reflects the opinions of Appleton Partners based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor. While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.  Specific securities identified and described may or may not be held in portfolios managed by the Adviser and do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed are, were or will be profitable. Any securities identified were selected for illustrative purposes only, as a vehicle for demonstrating investment analysis and decision making. Investment process, strategies, philosophies, allocations, performance composition, target characteristics and other parameters are current as of the date indicated and are subject to change without prior notice. Registration with the SEC should not be construed as an endorsement or an indicator of investment skill, acumen, or experience. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.