Market Gauge – August 2026

It appears as if the market’s assets and liabilities are evenly matched, although when we weight the elements by importance, our view of the market is favorable. Economic activity is solid and profitability remains exceptional – earnings growth for the SCP 500 is expected to be +29% and +14% for 2026 and 2027, respectively. It is difficult to get too bearish when the earnings backdrop is so positive and rates are relatively well-behaved.

However, it does appear as if there is a gathering storm of investor concerns that may make it difficult for the market to make a lot of forward progress in the short to immediate term. Tariffs are back in the mix, long-term rates are on the rise, and there are concerns about how the hyperscalers can sustain their pace of spending on A.I. without further injections of capital. Finally, a resumption of the war (and the higher oil prices that go with it) heighten concerns about the health of consumer spending and the potential for a tightening of monetary policy. Iran’s decision to target energy infrastructure has introduced a meaningful supply risk premium, but equity markets, for now, appear to be looking through the shock. Oil prices have retreated from their April highs and have not broken above them despite continued conflict escalation. That has, for now, kept pressure on profit margins and consumers from intensifying. But that is not the only source of inflation the Fed must monitor; computer component parts have also seen prices rise as A.I. demand has surged. History indicates most major inflation waves have a second wave follow. We’ve been in a lull, but the global energy price surge and supply chain disruptions threaten this calm.

We continue to believe that Fed Chair Warsh is serious about fighting inflation but is also hesitant to cut off the potential productivity gains that stem from increases in capital spending. His ability to justify not raising rates over the next few months will much depend on the path of inflation and inflation expectations (which, for now, remain restrained). We believe monetary policy is still an asset to the stock market, but it will need to be monitored closely. And the probabilities are moving in the wrong direction.

This quarterly market update has been developed by Baird Strategas, and provided by Kimberly Austin, a Baird Financial Advisor serving the Sacramento Valley. For more information on Kimberly and the latest market insights, visit kaustin.bairdwealth.com.

IMPORTANT DISCLOSURES

This communication is provided for informational purposes only and while the information used for this article has been obtained from sources deemed reliable, we cannot guarantee its accuracy. Past Performance is not indicative of future results. All investments carry some level of risk, including loss of principal. An investment cannot be made directly in an index.

This communication was prepared by Baird Strategas LLC (“Baird Strategas” or “we”), a broker-dealer and FINRA member firm and SEC-registered investment adviser and edited and presented by Baird Private Wealth Management for its clients. We are affiliated with Strategas Asset Management, LLC, an SEC-registered investment adviser that leverages Baird Strategas analyses to manage and provide investment advice to client accounts and exchange-traded funds. We are also affiliated with Robert W. Baird C Co. Incorporated (“Baird”), a broker-dealer, FINRA member firm and SEC-registered investment adviser. Baird Strategas and Baird conduct separate and distinct businesses and maintain separate research departments.