Market Monitor – Mid-Month Update

Mid-Month Update

Headlines & Highlights

• Iran War ceasefire officially over: The 60-day ceasefire signed in mid-June by the U.S. and Iran officially expired on August 17, with both sides accusing the other of frequently violating the temporary pact. The “memorandum of understanding” was intended to halt fighting to give negotiators a chance to work out a peace plan, but those complex talks via intermediaries failed to build momentum. While active hostilities have eased in recent weeks, oil-tanker traffic through the Strait of Hormuz remains light and the U.S. is continuing its naval blockade of Iranian ports to exert economic pressure on Tehran.  

• Inflation drops for 2^nd straight month: The Consumer Price Index (CPI), the nation’s best-known measure of inflation, dipped to an annual rate of 3.4% in July. It was the second straight month of declines following the recent peak of 4.2% recorded in May (June was 3.5%). Annual “core” CPI, which excludes volatile food and energy, came in at 2.5% in July, down a tenth of a point from June and matching the lowest level since early 2021. The latest report on wholesale inflation was also lower: The Producer Price Index (PPI) annualized reading for July was 4.7%, down from 5.5% in June. 

• Stocks charging upward in August: Lower inflation, relative calm in the Middle East and strong earnings trends have contributed to stellar performance for U.S. and international stocks in August. As of mid-month, the iShares ETF for the S&P 500 large-cap index was up 4.0% in August, bringing its year-to-date return to 14.5%, while the ETF for the Russell 2000 small-cap index had gained 4.7% and 24.4% over the same time periods. The ETFs tracking international developed and emerging markets have picked up 2.8% this month (14.9% YTD) and 3.4% (22.4% YTD), respectively. Bonds are up slightly for the month and the year, while REITs are generally down in August but still double-digit positive in 2026 overall. 

Chart of Interest

Key Takeaways

• A new formal Middle East ceasefire appears unlikely and neither Iran nor the U.S. are publicly advocating to resume negotiations, but because both sides have compelling reasons to end the war, we could be seeing more posturing for advantage. So far, the uncertainties have had a limited impact on oil prices – Brent crude, the international oil benchmark, is up only 2.6% over the past month to roughly $91 per barrel.  

• A U.S. jobs market that appeared to be rising in the first half of 2026 ran into turbulence in July. The Bureau of Labor Statistics said that the economy lost 23,000 jobs last month, and it subtracted 103,000 jobs from what was previously reported for May and June. Retail sales for July fell a surprising 0.6% from June – it was the largest month-over-month drop in more than a year.    

• The downward trend for inflation and concern about jobs have tempered expectations that the Federal Reserve will raise short-term interest rates in 2026. As of August 17, futures activity suggests that the market does not envision a rate hike before December, and even for that month, the odds of an upward move have diminished in recent weeks. Our consistent view has been zero rate hikes this year. 

• An ambitious outlook for earnings for the second quarter has turned out to be too restrained based on the actual results. According to the data firm FactSet, with close to 90% of the S&P 500 already reporting, Q2 earnings are 50.4% higher than the same quarter last year. U.S. small caps and international shares are also benefiting from strong earnings growth.  

• Since bottoming out on March 30, the S&P 500 has climbed about 22%, and along the way has set 23 new all-time highs. Technology, which comprises more than a third of the index, accounts for most of the S&P’s gain – the sector is up 49% in the current rally, driven by the accelerating AI infrastructure buildout. Financials, the second-largest sector at over 12%, is up 23% since the end of March. 

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