Weekly Market Wrap: August 22, 2026

Brought to you by your local Edward Jones financial advisors. A roller-coaster week for rates: Separating opportunity from risk Key takeaways Upward pressure on long-term Treasury yields weighed on investor sentiment, sending stocks lower last week. Although the Treasury Department's buyback announcement briefly pushed yields lower, the broader forces that we see driving yields higher remain in place. We continue to expect the 10-year Treasury yield to trade between 4.5% and 5.0% over the remainder of the year. Higher yields have improved the multiyear return outlook for investment-grade bonds by increasing their income potential. However, with yields likely to remain range-bound in the near term, price appreciation may be limited, in our view. We recommend maintaining a neutral duration position relative to the U.S. investment-grade bond benchmark. August and September have historically been seasonally weaker months for stocks, and uncertainty could rise as the midterm elections approach. While a period of near-term consolidation would not be surprising to us, resilient economic activity and strong corporate profit growth underpin a constructive backdrop for equities over the next 12 months, in our view. After a strong earnings season helped lift U.S. equity markets to record highs in August, stocks took a breather last week as the bond market moved to center stage. Rising long-term yields raised concerns about whether the economy and financial markets could continue to withstand higher borrowing costs, particularly as the 30-year Treasury yield reached its highest level since 2007 early in the week. Perhaps most surprising is that the latest rise in long-term yields has come on the heels of a weak July payrolls report, moderating inflation data, and reduced expectations for Federal Reserve rate hikes, conditions that would ordinarily place downward pressure on yields. The rise in long-term yields without a clear macroeconomic driver also caught policymakers' attention. The Treasury Department announced that it would increase the size of its long-term Treasury buybacks beginning next month. Following the announcement, the 30-year Treasury yield fell by 0.1 percentage points on Wednesday, its largest one-day decline in more than a year. However, the reprieve proved short-lived, as long-term yields recouped much of the decline over the remainder of the week. In this week's report, we unpack the forces putting upward pressure on longer-term yields and assess what they could mean for the economy and investor portfolios. Source: FactSet. Data as of mid-day 8/21/2026. Past performance does not guarantee future results. Edward Jones Estimates The chart shows that the 10-year U.S. Treasury yield has risen while expectations for Federal Reserve interest-rate hikes have eased. What's behind the move higher in long-term yields? Although no single macroeconomic development fully explains the upward pressure on longer-term yields, we believe several factors have contributed to the move over the past several months: Higher bond supply: Elevated issuance of U.S. investment-grade corporate bonds may be contributing to the rise in yields. According to the Securities Industry and Financial Markets Association, or SIFMA, investment-grade U.S. corporate bond year-to-date issuance through July was 27.1% higher than during the same period in 2025. As discussed in our Monthly fixed-income focus, technology companies' borrowing to fund artificial-intelligence investment has played what we consider to be an important role in the increase in corporate debt issuance. Ongoing geopolitical uncertainty: After falling below $70 per barrel in early July, West Texas Intermediate crude oil prices subsequently rebounded amid continued uncertainty in the Middle East and the flow of oil through the Strait of Hormuz. WTI rose back above $85 per barrel last week, adding to uncertainty about the outlook for global inflation. Encouragingly, however, market-based inflation expectations over the coming five- and 10-years remain contained. Upward pressure on global yields: The rise in longer-term government bond yields has not been unique to the United States. Long-term government bond yields in the United Kingdom, Japan, Canada, France and Germany have also moved toward multiyear highs. Although country-specific factors differ, the broadly synchronized increase may reflect a combination of heavier global government borrowing, renewed inflation uncertainty, and expectations that global policy rates could trend higher over the coming months. Investors demanding higher compensation to hold long-term bonds: Another factor contributing to higher long-term Treasury yields may be investors' demand for greater compensation for the risks associated with holding longer-maturity bonds. The Federal Reserve Bank of New York publishes model-based estimates that decompose U.S. Treasury yields into two components: The expected average path of short-term interest rates over the life of the bond. The term premium, which represents the additional compensation investors require for the risk that interest rates may differ from expectations. According to the New York Fed's model, the estimated 10-year Treasury term premium has generally moved higher in recent years, suggesting investors are requiring higher compensation to hold long-term bonds. However, the term premium remains relatively contained by historical standards and does not appear to signal immediate cause for concern. Source: FactSet, Federal Reserve Bank of New York. ACM 10-year Treasury Term Premium. Edward Jones Estimates This chart shows that the Federal Reserve Bank of New York's 10-year U.S. Treasury Term Premium model suggests investors are demanding higher compensation for holding longer-term bonds in recent years. While the term premium has risen, it remains contained from a historical standpoint. In our view, some increase in the term premium is understandable given the current environment. Large fiscal deficits and growing federal borrowing needs have increased the supply of Treasury debt, which may require higher yields to attract investors. At the same time, the Federal Reserve's reduced reliance on forward guidance under Chair Kevin Warsh may have increased uncertainty about the path of monetary policy. We believe that uncertainty is especially relevant at a time when geopolitical developments are clouding the outlook for inflation. All else equal, greater policy uncertainty may lead investors to demand additional compensation for holding longer-term bonds. Higher yields catch policymakers' attention After the 30-year Treasury yield reached its highest level since 2007 last week, the Treasury Department announced that it will increase purchases of off-the-run (not recently issued) Treasury securities with 10 to 30 years remaining until maturity. Beginning September 9, the maximum purchase amount will rise from $2 billion to at least $4 billion per operation. Although the increased purchases are small compared with the roughly $32 trillion Treasury market1, the announcement provided a powerful signaling effect, with the 30-year Treasury yield posting its largest daily decline in over a year. However, the program does not address the broader pressures that have contributed to higher yields, in our view, including large budget deficits, inflation uncertainty and increased debt supply. Reflecting this view, long-term yields recouped much of the initial decline. We expect these pressures to keep yields elevated, with the 10-year Treasury yield likely to trade between 4.5% and 5% over the remainder of the year. Looking forward, the administration is expected to unveil a fiscal consolidation initiative to help alleviate rising debt and funding costs, which may address some of the market uncertainty. While soft patches exist, corporate and economic activity have been resilient overall Interest-rate-sensitive parts of the economy have shown clear signs of weakness as borrowing costs have risen in recent years, with housing among the most affected sectors. Since the start of 2023, inflation-adjusted residential investment has been broadly flat and has contracted in five of the past six quarters. Last week, the NAHB/Wells Fargo Housing Market Index, a survey-based measure of homebuilder sentiment, edged up to 35 in August. However, it remained well below its 30-year average of approximately 51.5. Existing-home sales have also declined meaningfully as higher mortgage rates have reduced affordability for prospective buyers. Source: FactSet. Edward Jones Estimates The chart shows that existing home sales have fallen in recent years alongside a rise in mortgage rates. Past performance does not guarantee future results. The silver lining, in our view, is that other areas have remained resilient despite higher interest rates. On Friday, we learned that business activity remained solid in August, with the preliminary S&P Global Composite Purchasing Managers' Index rising to 56.04, the highest reading since March of 2022. Household spending was also robust in the second quarter, with inflation-adjusted personal consumption rising at a 3.2% annualized rate. Corporate earnings growth has also exceeded expectations this year. S&P 500 earnings are on pace to grow by more than 48% year-over-year in the second quarter, while full-year earnings are on pace to rise by 31%. Although strong profit growth among mega-cap technology companies has been a major contributor to the results for U.S. large-cap stocks, earnings strength has extended further down the market-cap spectrum. Earnings for U.S. small- and mid-cap stocks are also expected to grow by more than 20%. Source: FactSet. Edward Jones Estimates The chart shows that earnings growth estimates for 2026 have been revised higher across the market-cap spectrum. An index is unmanaged, cannot be invested into directly and is not meant to depict an actual investment. Positioning portfolios in a higher interest-rate environment We expect fiscal concerns, increased bond issuance, broadly resilient economic activity, and uncertainty about inflation to keep interest rates higher for a while longer, though largely within a range of 4.5% to 5.0% for the 10-year Treasury over the remainder of the year. While this may limit the potential for meaningful price appreciation in bonds, we think higher yields have helped improve the longer-term appeal of investment-grade bonds and help reinforce their role as a strategic allocation in a well-diversified portfolio. We recommend investors maintain neutral duration exposure relative to the benchmark in U.S. investment-grade bonds. Against this backdrop, we believe the outlook over the next 12 months favors equities over fixed-income, particularly given the support from strong profit growth and healthy economic activity. Within equity markets, we acknowledge the potential for a period of near-term consolidation after what's been a solid move higher in 2026. August and September have historically been seasonally weaker months for stocks, and uncertainty could increase as the midterm elections approach, but periods of weakness may provide opportunities to add to equites, in line with your investment goals and risk tolerance. We specifically favor U.S. large- and mid-cap stocks, which we believe offer an attractive combination of quality, exposure to artificial intelligence, and sensitivity to continued economic resilience. We also favor emerging-market stocks, which we believe provide international exposure to strong profit growth tied to the AI buildout, while trading below their 10-year average forward price-to-earnings multiple. Brock Weimer, CFAInvestment Strategy Source for all data not cited: FactSet. Source: Treasury Department. Debt held by the public which does not include intragovernmental holdings of Treasuries. Brock Weimer is responsible for analyzing economic data, assessing market trends, and supporting the development of resources that help clients work toward their long-term financial goals. Brock graduated from Southern Illinois University Edwardsville with a bachelor's degree in economics and finance. He is a CFA® charter holder and member of the CFA Institute and CFA Society of St. Louis. Important Information: The Weekly Market Update is published every Friday, after market close. This is for informational purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice. Investors should understand the risks involved in owning investments, including interest rate risk, credit risk and market risk. The value of investments fluctuates and investors can lose some or all of their principal. Past performance does not guarantee future results. Market indexes are unmanaged and cannot be invested into directly and are not meant to depict an actual investment. Diversification does not guarantee a profit or protect against loss in declining markets. Systematic investing does not guarantee a profit or protect against loss. Investors should consider their willingness to keep investing when share prices are declining. Dividends may be increased, decreased or eliminated at any time without notice. Special risks are inherent in international investing, including those related to currency fluctuations and foreign political and economic events. Before investing in bonds, you should understand the risks involved, including credit risk and market risk. Bond investments are also subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity. This section and content are designed for U.S. residents only. The services offered within this section are available exclusively through our U.S. financial advisors. Edward Jones' U.S. financial advisors may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state.