• Stocks slightly lower to start the week – Major equity indexes ended modestly lower, with technology stocks underperforming ahead of NVIDIA's closely watched earnings report on Wednesday. Long-term Treasury yields declined and bonds rebounded from last week's sell-off, supported by reports that the Treasury Department could utilize its Treasury General Account to help fund buybacks and provide additional liquidity to the market. In commodities, WTI crude oil fell 2% to $85 per barrel as Treasury Secretary Bessent unveiled a new global sanction plan to isolate Iran's economy. On the trade front, U.S.-Canada negotiations broke down on Friday, triggering new U.S. tariffs of 50% on roughly $20 billion of Canadian goods and prompting Canada to pledge dollar-for-dollar retaliatory measures beginning September 8. The developments weighed on the Canadian dollar, while gold climbed to its highest level in three months as investors sought safety amid rising geopolitical and trade uncertainty. Overall, markets appear to be balancing trade and geopolitical concerns against easing bond yields and anticipation surrounding NVIDIA's earnings, which could provide an important gauge of AI-related spending and broader market sentiment.
   
• Bond yields ease but remain near cycle highs - Bonds got some relief today following last week's sell-off, which prompted the Treasury Department to announce plans to increase buybacks of long-dated Treasuries in an effort to ease upward pressure on yields. Reports this morning indicate that Treasury Secretary Bessent is considering utilizing the roughly $950 billion Treasury General Account (TGA) to help finance expanded government bond buybacks, potentially providing additional support to the Treasury market without requiring Fed involvement. In our view, the Treasury's intervention underscores the administration's sensitivity to rising interest rates. While buybacks of Treasury securities with 10 to 30 years remaining to maturity may improve market liquidity and investor sentiment at the margin, we believe they are unlikely to offset the fundamental forces driving yields higher. In our view, those include persistent inflation concerns, geopolitically driven energy risks, uncertainty surrounding the Fed's policy path over the next several months, resilient economic growth fueled in part by heavy AI-related investment, and increased bond issuance from both the public and private sectors.
   
• Markets can withstand current yields; Jackson Hole is the next key test - Although higher yields remain a headwind for fixed income returns and equity valuations, we do not believe current levels represent a material threat to the economy, corporate earnings, or equity markets. The 10-year Treasury yield peaked near 5% in 2023 and has largely remained within a broad trading range since then, while still below the economy's roughly 6.5% nominal GDP growth rate. Meanwhile, equity valuations have already compressed this year, leaving earnings growth as the primary driver of market performance. As long as economic activity remains solid and profits continue to expand, higher yields are more likely to act as a valuation constraint than a catalyst for a broader market downturn, in our view. Looking ahead, investors will be closely watching for signals from the Fed's Kevin Warsh at the Jackson Hole symposium, where any clues on the policy outlook, or the Fed's tolerance for above-target inflation, could influence both bond yields and broader market sentiment.

Angelo Kourkafas, CFA;
Investment Strategy

^{Source for all data: Bloomberg.}

• Markets rebound on Friday – U.S. equity markets were higher across the board on Friday as investors looked for buying opportunities after a near 2.0% sell-off in the S&P 500 earlier this week. The Dow Jones outpaced the S&P 500 and the tech-heavy Nasdaq. This comes after U.S. Treasury Secretary Bessent announced on Wednesday that the Treasury would at least double its buybacks of longer-dated Treasury securities, increasing purchases from roughly $2 billion to at least $4 billion, and suggested the buybacks could be expanded further if needed. He also noted that the administration would unveil a plan for fiscal consolidation in the days ahead. While Treasury yields have stabilized somewhat, they remain near the highs of the year, with the 10-year yield at about 4.73% and the 30-year yield at around 5.27%. In our view, the 10-year yield is likely to remain in the 4.5% to 5.0% range, and upcoming inflation readings will likely be critical inputs for both yields and the Federal Reserve interest rate decision.
   
• What do higher yields mean for investors? – Treasury yields are close to the highs of the year, with the 30-year Treasury yield near the highest level since 2007. What do higher yields mean for investors? First, the cost of borrowing increases, both for consumers, in areas like mortgages and auto loans, and for corporations looking to tap the debt market. But keep in mind, this economy has been able to grow steadily even with fluctuating yields. Higher yields also mean there is an alternative to equity markets, which can put downward pressure on stocks and valuations. Perhaps the silver lining is that for savers, or for those in retirement, near retirement or just looking for income, higher Treasury yields may provide that income opportunity. In addition, from the perspective of the Federal Reserve, higher yields also mean that the market is doing some form of tightening for the Fed.
   
• U.S. economic surprise index moves lower this month – The Citi U.S. economic surprise index, a measure of how U.S. economic data comes in versus forecast, has moved lower in recent weeks, indicating some cooling of the momentum in the U.S. economy. The index, which peaked at around 63 in early June, is now around 21 levels, suggesting economic surprises are still positive, but the magnitude and frequency of these upside surprises have eased. This likely has been driven by weaker-than-expected nonfarm-jobs reports as well as softer retail-sales and inflation readings. Overall, we believe that the U.S. economy has remained resilient, but that the Federal Reserve may consider this recent cooling as it debates whether to raise rates at the September FOMC meeting. In our view, if this backdrop of elevated Treasury yields and moderating economic data holds, the Fed may keep rates steady rather than raise rates and risk further deterioration in consumption and growth.

Mona Mahajan;
Investment Strategy

^{Source for all data: FactSet.}

• Markets close lower as bond yields rebound – U.S. equity markets ended lower on Thursday as bond yields reversed some of yesterday's decline, with the 10-year Treasury yield rising to 4.70%. Consumer staples and consumer discretionary stocks led markets lower, while energy outperformed on higher oil prices. The weakness in consumer-oriented sectors, combined with the rebound in yields, suggests investors remain sensitive to the outlook for household spending and interest rates, in our view. In international markets, Asia finished higher overnight, while Europe ended mostly lower. In energy markets, WTI oil extended its recent advance to about $87 per barrel amid ongoing disruptions in the Strait of Hormuz. The U.S. dollar was little changed against major currencies.
   
• Walmart headlines a busy week for retail earnings – Walmart, widely viewed as a bellwether for consumer spending, reported solid second-quarter results, with earnings and revenue exceeding forecasts. However, the company's outlook was softer than expected, weighing on its shares, which were down about 9% on the day. Together with other recent data, Walmart's stronger-than-expected sales provide further evidence that consumer spending remains resilient, in our view. With the unemployment rate contained at 4.1% and 7.4 million job openings still exceeding the 6.9 million unemployed workers, we expect the stable labor market to continue to provide growing income to help support household spending and the broader economy.
   
• Leading economic index strengthens – The Conference Board's Leading Economic Index (LEI) rose 0.2% in July to 99.5, exceeding forecasts for a 0.1% increase. The index is designed to provide an early signal of potential turning points in the business cycle and the near-term direction of the economy. July's improvement was driven primarily by lower unemployment claims, higher housing permits, and a steeper yield curve. The index's six-month change turned positive for the first time in more than four years and is not currently signaling recession risk. Overall, we believe these readings remain consistent with a resilient economy, as labor-market stability and improving housing indicators offset weak consumer expectations and softer manufacturing orders.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• Markets edge higher as bond yields pull back – U.S. equity markets closed higher on Wednesday, supported by a decline in bond yields following the announcement of increased U.S. Treasury buybacks. Lower yields appeared to provide a near-term tailwind for equity valuations. In international markets, Asia and Europe finished mostly lower. In energy markets, WTI oil prices extended their recent advance, currently near $84 per barrel amid continued disruptions in the Strait of Hormuz. The U.S. dollar declined against major currencies, consistent with the drop in Treasury yields.
   
• Bond yields decline following Treasury buyback announcement – Treasury yields moved lower today, with the 10-year yield near 4.64%. The decline followed the U.S. Treasury announcement that it will roughly double the size of its liquidity-support buyback operations for longer-dated securities in the 10-year to 30-year maturity range. The change will take effect September 9, 2026, and remain in place until at least November 4, 2026. The Treasury noted that the larger operations are intended to improve liquidity in longer-dated securities. In our view, the announcement may help ease near-term liquidity pressures and improve market functioning, which could support prices and place downward pressure on yields, particularly for long-term bonds. However, it does not address what we consider the key factors driving bond yields, including federal budget deficits, inflation expectations, rising AI-related borrowing, and Federal Reserve policy.
   
• U.S. pauses proposed 50% tariffs on select Canadian goods – The Trump administration suspended the previously announced 50% tariffs for three days, allowing additional time for negotiations. The administration said Canada had expressed a commitment to reduce or remove certain tariffs and other trade barriers affecting U.S. exports. The proposed U.S. tariffs would have applied to nearly $20 billion of Canadian goods, primarily in the automotive, alcoholic beverage and dairy industries. Certain qualifying goods covered by the U.S.-Mexico-Canada Agreement (USMCA) would also be subject to the tariffs. However, exemptions would limit the affected trade to about 5% of the $382 billion in Canadian imports in 2025. The pause reduces the immediate risk of escalation, but its short duration means some uncertainty remains, in our view. Until a broader agreement is reached, businesses in the affected industries may continue to face planning challenges, potential supply-chain disruptions, and uncertainty over future costs.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.}

• Stocks finish lower amid elevated interest rates – U.S. equity markets closed lower on Tuesday, as elevated bond yields and weakness in technology stocks weighed on sentiment. After moving higher early in the day, longer-term bond yields finished little changed, with the 10-year Treasury yield closing at around 4.7% and the 30-year yield finishing around 5.28%. Despite the pullback in yields over the course of the day, the 10-year Treasury yield remains near its year-to-date high, while the 30-year yield remains near its highest level since 2007. From a market-leadership perspective, technology was a notable laggard, with weakness in semiconductor stocks weighing on the sector and contributing to a 1.3% decline in the Nasdaq. Meanwhile, the energy sector outperformed, supported by a modest rise in oil prices and ongoing uncertainty about developments in the Middle East. Defensive sectors, including health care and consumer staples, also outperformed, reflecting a defensive posture across markets on Tuesday.
   
• Government bond yields edge higher, weighing on sentiment – Despite a modest decline today, government bond yields have moved modestly higher this week, particularly at longer maturities, with the 10-year Treasury yield trading around 4.7% and the 30-year yield near its highest level since 2007, at 5.28%. There has been limited incremental economic news to explain the move higher in yields, particularly because the move higher has followed encouraging July inflation data and a repricing of Fed expectations toward keeping rates on hold in September. Rather, markets seem to be responding to several factors that are placing upward pressure on yields. First, the Securities Industry and Financial Markets Association (SIFMA) reported that, through July, U.S. investment-grade corporate bond issuance was nearly 30% higher than during the same period last year. In our view, elevated investment-grade bond supply could be contributing to the move higher in yields. Another factor likely contributing to higher yields is ongoing uncertainty in the Middle East, which has pushed WTI crude oil prices back above $80 per barrel. Additionally, we think fiscal concerns may be placing upward pressure on longer-maturity yields after the U.S. recorded its largest monthly budget deficit since March 2021 in July. In the near term, we expect these factors, along with a generally healthy economic backdrop, to keep longer-term yields elevated. We expect the 10-year Treasury yield to remain within a range of 4.5% to 5.0% over the remainder of the year. Against this backdrop, we recommend that investors maintain neutral duration exposure relative to the benchmark, as we expect the conditions noted above to keep longer-term yields elevated in the near term.
   
• Retail earnings in focus – Retail earnings are in focus Tuesday, with investors digesting results from home-improvement retailer Home Depot, which reported better-than-expected earnings and sales for the quarter. Management noted broad-based demand across the business, with a 2.8% increase in average ticket size and customers’ continued willingness to take on smaller projects helping drive the better-than-expected results. Additionally, management reaffirmed its full-year guidance, highlighting, in our view, cautious optimism about consumer spending trends. Consumer spending trends should remain in focus, with Lowe’s, TJX, Ross Stores, and Walmart scheduled to report later this week. Despite a soft July retail-sales report last Friday, we expect household spending to remain steady over the remainder of the year. While the benefits of tax refunds earlier this year are likely behind us and elevated oil prices could continue to weigh on discretionary spending, stable labor-market conditions and healthy household balance sheets should continue to support spending through year-end, in our view.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}