Weekly Market Wrap: August 28, 2026

Brought to you by your local Edward Jones financial advisors. Key Takeaways The burden of proof shifts back to AI skeptics. NVIDIA's earnings reinforced that AI demand and spending remain robust, with customer demand continuing to outpace supply and little evidence that the AI investment cycle is nearing an end. Warsh provided greater clarity on the Fed's priorities. At Jackson Hole, the Fed Chair reaffirmed the Fed's commitment to its 2% inflation target and made clear that restoring price stability remains the central objective, leaving the door open to additional rate hikes if inflation remains elevated.September seasonality may be less daunting than usual. While seasonal headwinds warrant monitoring, supportive fundamentals suggest the broader market trend remains intact. As a result, we continue to favor a combination of AI-related and cyclical exposures. September has historically been a more challenging month for markets, but investors are entering this month with greater clarity on two issues that have dominated the investment landscape. NVIDIA's earnings provided fresh evidence that the AI investment cycle remains intact, while Kevin Warsh's Jackson Hole speech reinforced the Fed's commitment to restoring price stability. While uncertainty never fully disappears, investors enter the seasonally challenging period with a better understanding of both the AI growth story and the policy backdrop. The burden of proof shifts back to AI skepticsSince the release of ChatGPT in late 2022, NVIDIA has become the market's de facto barometer for the health of the broader AI ecosystem. Sitting at the center of the AI infrastructure buildout, the company's earnings carry implications far beyond a single stock. NVIDIA now accounts for roughly one-third of technology sector profits, more than 7% of total S&P 500 profits, and nearly 8% of the index itself. As a result, its quarterly results have become one of the most important gauges of both AI demand and broader market sentiment. Given growing concerns this year around AI spending, demand sustainability, and the rising cost of building AI infrastructure, investors were looking closely for signs that enthusiasm was beginning to fade. In our view, NVIDIA's latest results delivered the opposite message. Even after several years of extraordinary growth, demand for AI infrastructure continues to accelerate, with few signs of a meaningful slowdown. The company reported another standout quarter, extending its streak of earnings and revenue beats for 15 quarters, while also delivering a much stronger-than-expected outlook. Management projected revenue growth of approximately 70% next year, well ahead of analyst expectations near 46%. Also notable, management was explicit that its outlook is supply constrained. Customer demand forecasts imply growth closer to 100%, underscoring that the challenge is not demand but the ability to keep up with it. The broader takeaway, in our view, is that AI demand and capital spending remain robust, with little evidence that customers are pulling back on investment plans. While healthy skepticism has helped keep valuations in check, continued earnings strength provides an important source of support for the sector and the broader market. For now, we believe the burden of proof has shifted back to those arguing that the AI investment cycle is nearing its end. Source: FactSet, Edward Jones. Past performance does not guarantee future results. An index is unmanaged, cannot be invested into directly and is not meant to depict an actual investment. Debate is likely not over, but tech could get a near-term lift Even with underlying trends remaining constructive, we believe the AI narrative is evolving from a spending story to a monetization story. Investors are becoming less focused on whether companies are investing in AI and more focused on whether those investments will ultimately generate attractive returns. At the same time, rising costs are becoming a larger part of the conversation. NVIDIA recently announced a roughly 15% increase in chip prices to offset higher memory costs, underscoring both the strength of demand and the growing cost of building AI infrastructure. While higher pricing may support NVIDIA's profitability, it also raises the hurdle rate for companies investing billions of dollars in data centers and advanced AI models. For now, however, customers do not appear to be backing away. If anything, the latest earnings season suggests that AI spending remains a strategic priority, demand continues to outpace supply, and corporate appetite for AI investment appears largely intact. Encouragingly, positive developments were not limited to semiconductors. Results from several high-profile software companies helped push back against the narrative that AI will simply disrupt the software industry. Shares of Salesforce popped in response to earnings, while the broader software group has begun to recover some of the significant ground lost relative to semis over the past year. While leadership rotations among hyperscalers, semiconductors, and software are likely to continue, the latest earnings season suggests AI's benefits may be spreading more broadly across the technology sector. That does not settle the debate around the long-term winners and losers of the AI investment cycle, but it may support the tech sector in the near term. After lagging the broader market since peaking in early June, we believe the sector could be positioned for improved relative performance. Source: Bloomberg, Edward Jones. Past performance does not guarantee future results. Indexes are unmanaged, cannot be invested in directly and are not meant to depict an actual investment. Kevin Warsh delivers a clearer message at Jackson HoleThe end of August is often associated with the end of summer vacations, back-to-school preparations, and the transition to fall. For investors, however, late August means the Federal Reserve's annual Jackson Hole symposium, where speeches from Fed Chairs have often shaped market expectations and influenced asset prices. This year, the stakes were high, as investors were looking for further guidance from Fed Chair Kevin Warsh on the Fed's policy framework, its preferred inflation measure, and, more broadly, its commitment to restoring price stability. While Warsh did not offer explicit guidance on the future path of interest rates, we believe his remarks reinforced the Fed's credibility and provided a clear assessment of current economic conditions and policy priorities. Three key takeaways stood out: The Fed's 2% PCE inflation target remains unchanged – Following the July meeting, some investors questioned whether Warsh was open to emphasizing alternative measures of inflation that could present a more favorable picture. At Jackson Hole, he put those concerns to rest, reaffirming that the Personal Consumption Expenditures (PCE) price index remains the Fed's primary inflation gauge and that the 2% target is non-negotiable. We think that not moving the goalpost strengthens the Fed's credibility. Growth remains solid, the labor market is stable, and inflation is still too high – Warsh described the economy as resilient despite outside shocks, pointing to healthy consumer spending, strong business investment, rising corporate profits, and a labor market that remains consistent with full employment. However, he emphasized that inflation remains "quite elevated," underscoring that the Fed's inflation fight is not yet complete. The Fed still has "work to do," keeping the possibility of rate hikes alive – With economic activity remaining firm, monetary policy not clearly restrictive, and inflation above target for more than five years, Warsh signaled that the Fed's primary focus is on prices. The message was modestly hawkish, suggesting additional rate hikes remain possible if inflation data fail to improve (the September consumer price index (CPI) will be closely watched). Following the speech, futures markets increased the implied probability of a September rate hike to roughly 60%, up from about 35% beforehand. For investors, tighter policy is not typically market friendly. However, confidence that the Fed is prepared to act if inflation remains persistent could help contain upward pressure on longer-term rates, which are more closely tied to mortgages. Indeed, while short-term Treasury yields moved notably higher following Warsh's remarks as markets reassessed the path of Fed policy, yields on the 10- and 30-year Treasuries moved up only modestly. Although elevated 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 robust 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. Source: Bloomberg, Edward Jones. Past performance does not guarantee future results. September seasonality may not be as scary this time aroundWith both AI sentiment and the Fed outlook receiving a measure of clarity in late August, we believe the next question for investors is whether September's historically weak seasonality can disrupt an otherwise constructive backdrop. Historically, September has been the weakest month of the year for stocks, producing both the lowest average return and the lowest probability of positive performance. This seasonal tendency can be amplified during Midterm Election years, when investors often face elevated political uncertainty. That said, context matters. Periods of weakness in September and October have often occurred when markets were already under pressure or economic conditions were deteriorating. That does not appear to be the backdrop today. In addition, the historical Midterm Election effect tends to be relatively short-lived, with markets often regaining momentum once election-related uncertainty begins to clear. Fundamentals also remain supportive. AI sentiment received a meaningful boost following NVIDIA's earnings, corporate earnings growth continues to run at an unusually fast pace, and current estimates point to solid U.S. economic growth in the third quarter. Meanwhile, credit spreads remain tight, financial conditions are loose, and market volatility is low. While seasonal headwinds warrant monitoring, we do not believe they are sufficient on their own to derail the broader market trend. As a result, we continue to favor a combination of AI and cyclical exposure, in line with your investment goals and risk tolerance. For AI exposure, we like U.S. large-cap equities, emerging market stocks, and the S&P 500 communication services sector. On the cyclical side, we continue to favor U.S. mid-caps, international developed value equities, and the S&P 500 industrials sector. Together, we believe these exposures provide participation in both the structural growth opportunities tied to AI and the cyclical tailwinds supported by a still-resilient economy. Source: FactSet, Edward Jones. Past performance does not guarantee future results. Indexes are unmanaged, cannot be invested in directly and are not meant to depict an actual investment. Angelo Kourkafas, CFASenior Global Investment Strategist Sources for all data in commentary: Bloomberg, FactSet Angelo Kourkafas is responsible for analyzing market conditions, assessing economic trends and developing portfolio strategies and recommendations that help investors work toward their long-term financial goals. He is a contributor to Edward Jones Market Insights and has been featured in The Wall Street Journal, CNBC, FORTUNE magazine, Marketwatch, U.S. News & World Report, The Observer and theFinancial Post. Angelo graduated magna cum laude with a bachelor's degree in business administration from Athens University of Economics and Business in Greece and received an MBA with concentrations in finance and investments from Minnesota State University. 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. 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