Takeaway

The presenter's core view is that hawkish commentary from the Fed at Jackson Hole has reset interest rate expectations, creating a headwind for markets despite a very strong Q2 earnings season. The probability of a September rate hike jumped from the mid-30s to over 70% during August, pressuring fixed income and rate-sensitive equity sectors.

What the presenter said

• The presenter argues that two major themes drove markets in August: a significant earnings boom from the technology sector and oscillating global bond markets. [00:04]
• The S&P 500 saw one of its largest positive earnings surprises outside of a recession, with the Q2-2026 surprise exceeding 25%. [00:20]
• US interest rate expectations shifted dramatically after Chair Powell's hawkish speech at Jackson Hole, with the probability of a September hike moving from the mid-30s to over 70%. [02:15]
• Fixed income markets have had a difficult year as rising rates erased most of the year's total returns for investors. [04:26]
• Sector performance in the US diverged sharply, with Energy, Info Tech, and Materials leading while rate-sensitive sectors like Utilities and Real Estate lagged. [02:45]
• Internationally, the presenter notes that Asia performed well, driven by technology in Japan, Taiwan, and South Korea, while Europe was weaker. [03:28]
• Looking ahead, the presenter believes September will be an interesting month with key central bank meetings, and that markets are now pricing in one or two more rate hikes by year-end. [05:09]
• The ongoing conflict in the Middle East is highlighted as a continuing source of volatility for commodity markets. [05:49]

Trade ideas

• None stated. The presenter did not put forward any actionable trade ideas, instead summarizing the market's macro cross-currents.

Levels and data cited

• Q2-2026 S&P Earnings Surprise: 26.9% (Source: StoneX Wealth Management, Bloomberg)
• Chance of September rate hike: Moved from "mid-30s" to ">70%" during August (Source: Speaker)
• Expected rate hikes in 2026: Moved from "under one to 1+ or even 2" (Source: Speaker)
• August 2026 US Sector Returns:
  • Energy: +7.0%
  • Info Tech: +6.2%
  • Materials: +6.0%
  • Utilities: -4.8%
  • Real Estate: -1.9%
• Change in 2Y Yields (since 7/31/2026):
  • US 2Y: +0.10%
  • Germany 2Y: +0.10%
  • UK 2Y: 0.00%

Risks and what would invalidate this

• The ongoing conflict in the Middle East could have a wider economic impact and continue to cause volatility in commodity markets.
• There is uncertainty whether the hawkish rhetoric from central banks is merely "jaw-boning" or will translate into actual rate hikes.