Macro4Micro

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Refined Product Spikes: The Putin and Trump Effects

Glenn Reynolds, CFA — Sun, 13 Sep 2026 17:37:39 GMT

The chart details the price per gallon for diesel and regular gasoline from late 2021 through Friday. The current diesel spike is a major problem given its role in freight and logistics service costs (notably in trucking), the agricultural sector, and broader array of equipment markets. It brings a cost shock that will find its way into pricing or margins as well as the health of many small businesses. The 2022 and current price spikes are radical outliers in the time series.

Considering the scale, a glaring fact of political life is that you seldom hear about the Putin energy spike from Team Trump on the Biden era inflation pain. It is no different with his Congressional flock of sheep as they pretend the massive effects of the Putin invasion did not tie directly into the US inflation pain of 2022. It is almost as if the fact had been intentionally removed as part of partisan talking points. The main goal is just to say “Biden, Biden, Biden” over and over. Trump says Putin would never have dared invade Ukraine had Trump been President but we don’t see Putin backing down since Trump’s been in office. Quite the opposite.

Like the Putin aggression of 2022, Trump’s current Iran fiasco has done a lot of damage to CPI and PPI (CPI Aug 2026: Staying Stubborn, Not Accelerating 9-11-26, PPI August 2026: Leading Indicator Signaling Struggling 9-10-26). The PPI inputs were bad this past month but CPI less so. The PPI lines are feeling the latest shock, and those inputs in theory flow into the CPI and PCE numbers for September and beyond.

The 2022 chaos had the added challenge of over-stimulated, ZIRP-driven demand on the way into March 2022 and beyond. The massive supply-demand imbalances coming out of COVID had effects like the glaring example of 40% and 30% handle used car CPI. We also saw double digit CPI in new cars (see CPI: The Big 5 Buckets and the Add-Ons 11-10-22).

Those were strange times, and Team Biden and the Fed did plenty to make it worse. The effects of supply and demand do matter. We suspect the auto dealers were not sitting around chatting about monetary aggregates in the parking lot back in March 2022.

That said, the failure of Team Trump to cite that oil and refined product spike in 2022 reeks of partisan fact and concept avoidance (hardly an isolated event in politics). The same misinformation applies today. It is safe to say that Biden did not invade Ukraine. As we head into coming weeks, the events seem to be getting worse and not better with the Houthis and Iraqi elements going after Saudi Arabian oil assets and the Bab al-Mandeb strait under siege (see UST Curve: A Brutal Week 9-12-26). That is a direct result of Trump actions.

Nobody ever lays blame on Putin in Trump World for a big slice of the 2022 inflation. Putin even got a royal welcome and red-carpet treatment in August 2025 that you seldom see. In contrast, Ukraine was chewed out in the Oval Office.

Putin could have at least said, “Sorry, my bad on the oil spike.”

Weekly Tech Check Returns 9-12-26

Glenn Reynolds, CFA — Sun, 13 Sep 2026 01:11:50 GMT

The chart details the weekly price returns on the Tech Check mix of single names, ETFs, and broad market benchmarks. The balanced score of 16-16 shows a higher mix of AI ecosystem names in the top quartile with the bottom quartile heavier in the software names.

The Mag 7 mix cuts across all quartiles with 3 in the top quartile (META, AAPL, TSLA), 1 in the 2^nd quartile (GOOGL), 2 in the 3^rd quartile (AMZN, MSFT), and 1 in the bottom tier (NVDA). The low quartile shows 6 of 8 from the software universe along with 2 semis in Micron (MU) and NVDA.

The winners show DELL at #1, Advanced Micro (AMD) at #2, Qualcomm (QCOM) at #3, and Intel (INTC) at #4, so AI-based names are still at the helm. The Semiconductor ETF (SOXX) weighed in at +1.39% in the upper end of the 2^nd quartile with the Software ETF (IGV) at -2.92% for a 4.3% return differential this week. The YTD differential on SOXX vs. IGV was 79 points as of Friday. That differential was only around 1 point for the past month.

We see the Tech ETF (XLK), NASDAQ, and the tech-heavy S&P 500 hanging around the middle of this Tech Check mix this week. On a YTD basis, the broader NASDAQ and S&P 500 are modestly above the median return of this group at just under 10%. 2026 has been a game of picking winners and losers across the mix of tech broadly in semis and software. There were some very big winners in AI ecosystem names and very big losers in software. The YTD Hi-Lo return differential in this group between #1 and #32 is over 400 percentage points.

Glenn Reynolds, CFA — Sun, 13 Sep 2026 00:19:38 GMT

The chart details a grim week for the benchmarks and ETFs we monitor with a score of 5-27. Asset performance has been a struggle, and the negative vs. positive score is barely better over the trailing 1-month period at 6-26 with all four broad equity benchmarks and bond ETFs in the red.

Of the 5 positive asset lines, we see 3 of 5 from energy with E&P (XOP) at #1, Energy (XLE) at #2, and Midstream (AMLP) at #4. Communication Services (XLC) ranked #3 with only +0.51% and the Tech ETF (XLK) rounded out the top 5 barely positive.

The broad benchmarks were all in the red with NASDAQ negative but still in the top quartile. The S&P 500 was negative at the top of the second quartile. The S&P 500 saw 9 of its 11 sectors in the red. The Russell 2000 brought up the rear among benchmarks in the bottom quartile with Midcaps (MDY) only slightly better at the bottom of the 3^rd quartile. The breadth of poor performance was highlighted by the Equal Weight S&P 500 (RSP) in the red in the bottom quartile joined by the Equal Weight NASDAQ 100 (QQEW).

The US benchmarks were hardly alone with a large swath of indexes in Europe and Asia also negative the past week. Oil markets and downstream petroleum products are making economic life difficult for many. Sovereign yield curves have been getting no shortage of headlines along with rapidly rising UST yields.

The bottom dwellers in the US include the Homebuilder ETF (XHB) as mortgage pressure continues unabated. The Mortgage News Daily survey edged above 7.1% to end the week. The higher quality Freddie Mac mortgage rate priced at 6.76% on Thursday in its weekly reset, up from 6.35% at this point last year. For housing color, we get 3Q26 earnings this week from Lennar (LEN). LEN is one of the Big 2 of homebuilders. D.R. Horton is a Sept 4Q fiscal year, but LEN has struggled in this market.

The monthly payment burden in mortgages is only getting worse at this point, and the tariff wave and related costs are not going to make pricing strategies any easier with a wide range of supplies costing more. We get a builder 3Q26 earnings wave ahead when the Sept earnings season kicks off.

We also see Transports (XTN) getting hit by aviation fuel costs and as the marginal costs in vacation travel intrinsically shave off some leisure and corporate travel spending at the margin (including angry Canadian snowbird bookings). Diesel costs cannot be making life easier for truckers and freight and logistics operators.

The Materials ETF (XLB) is chemical-heavy in issuer mix, and the results there can vary widely based on feedstocks and product mix. BDCs (BIZD) felt some pressure again this week as investors gear up for floating rate liability pressure and questions on the quality trends of the most leveraged subset.

UST Curve: A Brutal Week

Glenn Reynolds, CFA — Sat, 12 Sep 2026 19:22:15 GMT

There goes the neighborhood…

The worst week in recent memory for the UST curve unfolded with the 10Y at 4.97%, just below the 4.99% Oct 2023 highs. The odds of 1 hike for this coming week edged above 87% to end the week. The Mortgage News Daily survey closed the week at 7.12%.
Oil (WTI) ran higher to $104 WTI at one point intraday during the week with the Friday close of just over $100 per bbl Friday for WTI and with Brent just under $105 per bbl. $100 WTI is a long way from the $82 handles just a month ago on Friday August 14.
PPI showed an ugly set of numbers. CPI did not bring a negative surprise while also not offering relief (see PPI August 2026: Leading Indicator Signaling Struggling 9-10-26, PPI August 2026: Leading Indicator Signaling Struggling 9-10-26).
We look at asset return results in a separate commentary, but all the major equity benchmarks were in the red from large caps down to small caps and the 7 bond ETFs we monitor were also in the red. The Homebuilder ETF (XHB) was in dead last in the bottom quartile along with the Equal Weight S&P 500 (RSP) and Equal Weight NASDAQ 100 (QQEW). This highlights the breadth of pain.

The above chart details the weekly UST deltas with the 2Y at +26 bps and 10Y UST at +18 bps to just under 5.0%. This week we get the FOMC answer and see what else Bessent will pull out of his hat.

The above yield curve migration chart shows the move toward the Oct 2023 highs. Note: We see over 4.97% on the 10Y UST at the end of Friday, but Y Charts time-stamped it at 4.96% in its data set.

We like including the 9-16-24 chart in this mix to show where the UST curve was just ahead of the Nov 2024 election. From that point on, the steepening that set in blew away many of the bull flattener forecasts that were in place for 2025. The bear steepener arrived with a vengeance. The recent trends have focused quite a bit on duration pain in the bond asset class.

The 10Y UST is a critical driver of market sentiment and 30Y mortgages, but the move to 5.35% has also generated a lot of headlines even with Bessent’s ineffectual liability management strategies.

The above chart updates the post-Iran UST deltas (bombing started 2-28-26). The policy effects are clear.

The above chart offers a reminder of what the UST curve was doing before Iran. Iran was not a great geopolitical or macroeconomic decision. We are not sure who told Trump that the “bomb vest crowd” would immediately surrender unconditionally. To avoid embarrassment, they just keep repeating “nuclear weapon” after already earlier stating such capacity had been obliterated.

What unfolded was a massive resource choke point in the Strait of Hormuz that spread to military escalation and worsening regional infrastructure damage. We now have the Houthis making their move on Red Sea economic damage with control of Bab al-Mandeb. Weapons stockpiles are already low for the US, so any response to the Houthis from the US will be a challenging decision point.

As reported on Friday, the Saudis have shut down their East-West pipeline that had offered some cushion to the Hormuz shortfall. The estimates we see cited include 4% to 5% of global supply. The EIA cited 8% of total 2Q26 crude oil + petroleum products.

The Red Sea share of total merchandise was reported at 12% of global trade, so the supplier chains could be heading into a new zone of trouble. That could mean even more inflation tied to supply-demand imbalances across the wider array of products. That is notably the case with Europe-Asia volumes.

The above UST deltas updates where the UST yield curve has trended YTD.

The above chart is one we typically include as a memory jogger on the troubled journey from COVID and ZIRP across the tightening and easing cycles. We detail the easing and tightening actions by month and magnitude across time in the boxes.

We see the shift after March 2022 to year end 2022 on the tightening and inflation pressures. That was clearly a major move from March to Dec 2022. This timeline cuts across the easing in late 2024 and 2025.

Trade wars and tariffs will play a role, and that is getting worse. Wages have been an X factor in past inflation cycles and that has not arrived (yet). Many eyes are looking for any hint of wage pressure, but that has not shown up at all at this point (see Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26).

Negative real wages in a steady economic cycle are supposed to move the needle higher on wage expectations, and that affordability discontent can show up in politics (election year) and policy decisions. Collective bargaining also can play a role.

The above chart does a similar exercise but drops in a yield curve for 9-16-24 just ahead of a fresh easing cycle. The inversion of Sept 2024 into an easing cycle in late 2024 and 2025 has not brought the results promised by Team Trump. They continue to demand easing, but the FOMC is likely to be resistant. The markets clearly are not on board. This week could bring some political fireworks.

The above UST history revisits the shift from the Carter inversion and peak of 1978 across the stagflationary 1980-1982 double dip that kicked off after an Iranian oil crisis in 1979.

We see the 9-16-24 UST curve sitting on the bottom during the late stages of the Biden administration, but we suspect Trump, Hassett, and Bessent will not be flagging that memory. After all, the UST curve had sent mortgage rates higher again after team Trump was put in office. We just crossed above the 7% threshold. We are still below the peak mortgage rates of Oct 2023 but closing the gap.

One of the key takeaways from history is that flat curves that arrive after some FOMC tightening in a cyclical peak can lead to trouble. The question will get louder if the Fed tightens again by year end and follows up with more.

Worries get worse if we start to see an inversion, but that appears a long way off unless the oil markets crash. Credit market peaks such as the transition across 1989 into 1990, the move into 2000 after a +86% NASDAQ year in 1999, and the tail end of 2006 on the way into 2007 all make for some interesting compare-and-contrast drills.

We look at some of these histories in the links at the end of this commentary.

The above chart updates the 3M to 10Y slope history from the January 2021 ZIRP period. The current +89 bps is well below the long-term median of +154 bps. In the recent post-ZIRP tightening cycle that shifted into an easing cycle by Sept 2024, we see a peak slope of +227 bps in May 2022 ahead of peak inversions of -189 bps (May and June 2023). The median from Jan 2021 through Friday close was only +13 bps.

The box also breaks out other current slopes and medians for UST segments we monitor.

The 3M-10Y slope timeline is posted above from January 1984. It highlights the dramatic swings across economic and monetary cycles. We left out the wild, distorted 1979-1982 years to avoid impairment of the visuals across remotely normal cycles.

Existing Home Sales Aug 2026: Headwinds Still Driving the Story 9-10-26

PPI August 2026: Leading Indicator Signaling Struggling 9-10-26

Weekly Tech Check: Semis vs. Software Push-Pull 9-7-26

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Some yield curve histories:

Business Cycles: The Recession Dating Game 10-10-22

UST Curve History: Credit Cycle Peaks 10-12-22

Bear Flattener: Today vs. 1994 and Aftermath 10-18-22

Fed Funds, CPI, and the Stairway to Where? 10-20-22

Greenspan’s First Cyclical Ride: 1987-1992 10-24-22

UST Curves: Slope Matters 10-25-22

Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22

Wild Transition Year: The Chaos of 2007 11-01-22

UST Slope Update: Some New Inversion Highs 12-8-22

Yield Curve Lookbacks: UST Shifts at Cyclical Turns 10-16-23

UST Moves 1978-1982: The Inflation and Stagflation Years 10-18-23

UST Moves: 1988-1989 Credit Cycle Swoon 10-20-23

UST Moves: The 1990-1991 Risk Factor Pig Pile 10-24-23

CPI Aug 2026: Staying Stubborn, Not Accelerating

Glenn Reynolds, CFA — Fri, 11 Sep 2026 21:22:31 GMT

Release the lions and the tariffs. Withold the food stamps.

There is little good news in the CPI metrics for August, but the numbers also did not surprise to the upside either. Energy was again just plain ugly, and the trends in Sept in Energy are offering ample cause to expect Sept CPI to be more biased to the upside. The economy steady and demand is likely to allow for more cost pass-throughs in price.
With a 3.4% headline CPI flat to July and Core CPI a tick lower from 2.5% to 2.4%, the high level numbers were little changed. The Sept noise in oil and downstream refined products are seeing the backdrop get worse – not better – with the Houthis now potentially taking the Saudi East-West pipeline out of action and potentially shutting down or severely disrupting the Red Sea oil channels. The Houthi actions could undermine a wider range of product flow across those shipping lanes. As we go to print, the Bab al-Mandab Strait is vulnerable to a new “choke point.”
The unfolding Canada trade war does not look to get better and could feed unit cost pressures across a wide range of US consumer and supplier chain markets. Steel, aluminum, and various manufactured products are feeling tariffs (buyer pays, no matter what Trump says). Canada does not appear inclined to leverage its natural resource edge to retaliate in that trade mix. The relative need for Canadian aluminum is high in the US even if not for many Canadian steel products. The desire to keep peace with the provinces (notably Alberta and Saskatchewan) could keep Canada from more aggressive export tax alternatives in retaliation. US suppliers will have higher pricing power now in the domestic market.

The above time series plots the headline CPI and Core CPI from the COVID plunge into the supply-demand imbalance year of 2021 and then into the Russian-Ukraine oil spike of 2022. Inflation spiked to a 9.1% headline CPI in June 2022 and 6.5% Core CPI in Feb 2022. That was edged out by the 6.6% Core of Sept 2022.

We see the 3.4% down from the 4.2% in May and the Core CPI on Aug 2024 back down to the Sept 2024 lows. The threat is still how tariffs flow into price structure and working capital management cycles. Next week’s FOMC decision shows high odds of tightening in FedWatch. The probability of a hike is now 86.5%.

In the aftermath of Iran, there has been no hiding from the direct inflationary effects of oil prices and the even more notable spikes in downstream products with a crisis underway in diesel, painful aviation fuel trends, the household cash flow hit from gasoline, and the wide and varied effects across raw materials, power costs, and freight and logistics fallout among the most obvious secondary and tertiary effects.

We already addressed some of the leading indicator price challenges in PPI yesterday (see PPI August 2026: Leading Indicator Signaling Struggling 9-10-26). We look at the data in charts further below, but the +16.3% YoY in Energy, the +28.0% in “Energy commodities,” and +27.4% for gasoline are obvious pressure points. The MoM for Energy of +2.1% follows two negative MoM months (-1.5% July, -5.7% June) with Sept already starting off badly.

The progress made in July and June often revolved around jawboning by Trump around empty threats of peace breaking out. Short-term trading opportunities abounded for friends and family.

The above chart updates the historical time series for fed funds vs. headline CPI. The latest headline of 3.4% for August is above Biden’s last full month, which was below the 3% line at 2.9%. The chart includes the long-term medians, which underscore that the current compression of CPI and fed funds is “not normal.”

The above chart frames the fed funds vs. CPI differential. “Fed funds minus CPI” is now +0.2% after it had turned negative in May at -0.6% or dramatically different than the long-term median of +0.6%. In its simplest terms, that relationship looks more like accommodation.

With FedWatch odds at over 86% for a tightening next week, we did not see much reaction in the 10Y UST to today’s CPI number after the 10Y got close to the Oct 2025 highs of 4.99% this week. We saw around 4.95% this week, but as we go to print the 10Y UST is 4.97%. That is bad news for mortgage rates also with the Mortgage News Daily survey rate just under 7.1% at 7.08%.

The customized special aggregate CPI indexes posted in Table 3 of the BLS release are troubling in historical context. Those detailed above are our favorites, but there is a long list worth reviewing.

Note: We had to be selective in the months included in the table in order to show more of the timeline. May 2026 (not shown) was an especially challenging month (see CPI May 2026: The 4% Rubicon 6-10-26).

“All items less shelter” has been our top pick across time as we have cited in prior research since “Shelter CPI” comes with too many asterisks and derived numbers that do not fit the typical household reality (or even close).

The chart shows “Services” still stubborn above the 3% line in what is a “services economy.” The Services line comprises 63.6% of the CPI index. Table 3 also drives home the stark differential between the Durables CPI (-0.3%) at a 10.6% weighting in the CPI and the much larger Nondurables line at +5.8% CPI for 25.8% of the CPI index. The ability (or desire) to pass through tariff costs has still not hit Durables CPI yet in a meaningful way.

The 3.6% for the “All items less shelter” metric in August is better than the 4.1% in April and the 4.7% of May with the energy spike. Even at the 3% handle now, that metric is still a material contrast with the sub-2% levels of 2024 including 1.9% in Dec 2024 (Biden’s last month). In mid-2023, the level was +0.7%. The FOMC was doing its job the right way by then, and the payroll additions of those 2023 days crushed what was posted on average in 2026.

The above table details our Big 5 subsectors for CPI. These roll up to around 75% of the CPI index, so overall this mix of 5 broad categories is the main event even if there are plenty of line items outside this group that matter to consumers.

We will not give much space to our long-held view on the low value of the lines that are “derived” and inconsistent with the household “checkbook experience” and household cash flow. That is notably the case with shelter and the steep deflationary number of -8.5% for health insurance.

Some of those lines speak for themselves at a time when such items as ACA premiums have soared and the deductible offerings are shifting the mix in the wrong direction. Too many people have had to drop coverage or see deductibles spike to find “affordable” health care. There are times when the measurement theories of the BLS econ teams do not work with the real-world consumer experience.

The total energy bucket of +2.1% MoM in August reverses the -1.5% MoM of July and is worse than the -5.7% energy relief of June but is a long way from the +10.9% MoM in March after the onset of the Iran War. The “Energy commodities” line was at +21.3% MoM in March and had set off a chain reaction with lag times.

Energy YoY metrics moved down sharply from +23.5% in May to +15.7% in June and +14.7% in July. The Energy CPI YoY line is back at +16.3% in August. Within Energy, the gasoline CPI of +24.6% in July is ugly but beats the +40.5% gasoline CPI of May. August CPI reports +27.4% YoY with the Strait of Hormuz “shut” again and the Red Sea now also in stress as noted in the bullets. The Iran War remains in chronic uncertainty on how long and how damaging it will be with such an erratic approach to policy. Handicapping odds of escalation or any other scenario is a mug’s game at this point.

We have to say that Hegseth (Trump to a lesser extent) highlighting the Iran war in his 9/11 speech at the Pentagon was a bit misleading in historical comparisons with 15 of the 19 terrorists on the planes from Saudi Arabia and zero from Iran (2 from UAE, 1 from Lebanon, 1 from Egypt). As someone living across the street on 9/11, the White House owes the public facts. Clearly, the Saudis and UAE have other virtues from Trump’s perspective ($$$). Confidence in foreign policy judgment in the Middle East is low when every statement has a domestic agenda to manipulate history.

As we go to print, WTI is over $100 per bbl vs. around $82 in mid-July and Brent is near $105 in contrast to the $88 at this time in last month’s CPI write-up. WTI had a $68 handle in the first week of July. That was a short reprieve.

Housing and healthcare anomalies…

The higher costs of housing are uglier when including financing and the monthly payment pain. CPI metrics do not capture that financing cost effect. Mortgages and the cost of financing do not get factored into the product line CPI. The UST curve and mortgages and auto financing have clearly been going in the wrong direction since 2025 and now well into 2026. 2027 is not looking any better and may well get worse.

With many households crushed by health care premiums (notably the ACA), the consumer is certainly not “feeling the deflation” in health insurance seen in the table at -8.5%. Those that struggle with health care coverage thus get held hostage to the rising costs of services as broken out. The 5.5% for “hospital and related services” is high by any measure with 5.4% for the outpatient subset. In other words, if you lose coverage, that is what awaits you with prices high in absolute terms. Trump’s lack of effort in health care is one of the worst consumer headwinds and notably in the lower part of “the K.”

The above table updates some of the lines near and dear to households. We see a split decision with 3 higher and 3 lower YoY. Airline fares at +23.4% in August are heavily tied to jet fuel costs. These lines are a mixed picture with divergences across lines within these buckets. We will see how much fallout comes from the fare spike in the peak travel season when airlines report Sept quarter earnings.

The Apparel CPI ticked lower from 3.9% to 3.6% after reaching 4.8% in May. Trump looked to inflict pain on the low-cost Asian countries, and we are surprised it is not higher. Trump lost on IEEPA, and that had heavily targeted Asia. Trump is now using the Section 301 “forced labor” strategy to raise tariffs on essentially all trade partners.

More importantly, Trump is now turning to a more flexible provision of the Smoot Hawley Act of 1930 (Section 338) that allows him free reign with no Congressional check. Trump (in theory) can play tariff dictator by using existing legislation on the books. That was not the case with IEEPA. When in doubt, turn to Hoover for sound economic policies. Right? That went so well after 1930.

PPI August 2026: Leading Indicator Signaling Struggling 9-10-26

Weekly Tech Check: Semis vs. Software Push-Pull 9-7-26

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Remembering a Day of Days

Glenn Reynolds, CFA — Fri, 11 Sep 2026 13:35:52 GMT

Existing Home Sales Aug 2026: Headwinds Still Driving the Story

Glenn Reynolds, CFA — Thu, 10 Sep 2026 23:29:20 GMT

Inventory is not that bad yet, but mortgages are heading the wrong way…

Declining existing home sales saw declines in 3 of 4 regions MoM on mortgage rate headwinds. We also saw 3 of 4 down YoY. Weak volumes are now a trend with affordability getting worse on monthly payment stress.
The swing factor to drive volumes higher would necessarily need lower prices but even then the mortgage rate factor is more pressing for those who need financing.
Another sub-4 million headline number for total existing sales is a threshold last crossed in June 2025.
Higher inventories combined with higher prices always seem like an anomaly, but that has been a common feature of existing home sales releases in a market where the ability to refinance is a very costly one for sellers on the next mortgage. Sellers want a good sales price to take that refinancing plunge, while buyers appear to have a different view on value. We see tight affordable supply as a recurring constraint on higher volumes in lower price tiers.

The above chart details existing home sales SAAR run rates by month from January 2023 to August 2026 with 3.98 million in August, down from 4.06 million in July and 4.13 million in June. As a frame of reference, during 2022 the market was posting 6 million and 5 million handle sales volumes in the first half of that year.

The recent existing home sales totals are starting to look more like the late 2023 period when mortgages had peaked (see Existing Home Sales Dec 2023: Rerun of Multi-Decade Low 1-19-24). That makes sense given current mortgage rates now above 7% (7.07% per Mortgage News Daily survey today). The 30Y mortgage rate has moved within a 200 bps range since the Oct 2023 peak when Freddie Mac 30Y hit 7.8% and many mortgage offerings were near 8%.

The painful reality is that housing will be heading into the “off season” with a very unfriendly UST backdrop (see Duration Daze: Post-ZIRP Bond Returns 9-7-26, UST Market: Curve Meets Knuckler 9-7-26).

The above chart shows the sales volume deltas by price tier for August 2026, and we see 5 of the 6 price tiers posting negative trends with the $1 million plus bucket the only one in positive range. The lower price tiers did worse. Note: We use “not seasonally adjusted data” for this chart.

For existing home sales, the monthly payment math is still unfavorable for those looking to cash out, move up, or simply relocate. Expectations for a bull flattener in the UST market that would translate into low to mid 5% mortgage rates have been crushed at this point for 2026 (and most likely for 2027) after major setbacks for that same scenario in 2025.

If the UST curve does eventually flatten, it would more likely be a bear flattener with the rising odds of tightening. With all due respect to Bessent’s liability management gambit to manage down the long end of the curve, the 10Y UST market that drives the 30Y mortgage rate is currently a fraction below the cyclical highs of Oct 2023 (4.95% now vs 4.99% 10-23).

The UST market has rejected the low-level Jedi Mind Trick by Bessent as an attempt at short term window dressing. The national debt levels keep rising along with the interest rate bill, and there is no hiding from it. The UST market sees it, the builders see it, and home buyers and sellers see it. Those most exposed are in the lower price tiers, and the real affordability crisis is tied more to the monthly mortgage payment and not the price of the house even if both matter.

The curve has steepened since 2024 and could steepen more if oil and tariffs and steady demand take inflation metrics higher. WTI crossed into $102+ and is nearing $104 today while Trump was kind enough to offer well over $1 trillion to voters if they put the GOP in charge in the election. Even if Trump could deliver that check (he can’t and he won’t just as with the DOGE and tariffs dividends), that would still be just one more UST supply threat.

The oil spike and price swings since Iran plus the documented inflation pressures from March to August will make life a challenge for Warsh with FOMC voters potentially stacking up against his preferences. We get more CPI data tomorrow with today’s PPI data being fairly grim (see PPI August 2026: Leading Indicator Signaling Struggling 9-10-26).

The above chart shows the geographic mix of volumes and details on price mix by region. The South is the main event in single family volumes whether new or existing at around 46% of total volumes.

For the bar chart, we break out the mix for each region by price tier. For example, the South shows around 50% of its existing home sales volume in the $250K to $500K range and around 18% of its sales in the $100K to $250K bucket.

The high cost of homes in the West (notably California) is clear enough just by glancing at the bar chart with over 17% at prices over $1 million. The second highest region in the $1 million club is the Northeast at almost 12%.

We see a major concentration across the regions in the $250K to $500K range although the $100K to $250K bracket for the Midwest stands at over 27%. The West shows a high share of over 28% in the $500 to $750K bracket, which again underscores how expensive the West region price tags remain in national context.

The map explains what states are in each Census region. There is a very wide range of home price profiles in the West and Midwest states.

Inventory for total existing homes ticked higher MoM to 1.62 million units for +3.2% MoM and +5.9% YoY. Current inventory is well below longer term medians including 2.08 million for the post-1998 median. The median from Jan 2011 (homebuilding low) to current times is 1.74 million.

In other words, existing home sales inventory remains low even if the level is materially higher than the stunning low of 850K of Feb 2022 ahead of the end of ZIRP and start of the tightening cycle in March 2022.

The existing home inventory balance had shown a steady rise off the sub-1 million lows of 2022. Inventory had risen to the 1.3 million handle range in 2024 before dipping back down to a low of 1.14 million to close out 2024. We bounced off those numbers in 2025 to get back above 1.5 million handles before the move lower to 1.2 and 1.3 million handles and then back to current levels above 1.6 million.

The above two-sided chart updates the trend line in total existing home sales vs. new single family homes. It’s clear that both are low in historical context even if new home sales are well above the post-bubble collapse. The notable exception is the post housing crisis plunge as highlighted in the time series shows a low of 270K. That was one for the ages.

The above chart breaks out the timeline for August existing single family only of 3.62 million vs. total existing home sales of 3.98 million. The 3.98 million total is well below the long-term median (from Jan 1999) of 5.2 million. The total of 3.62 million for single family is well below the long-term median of 4.62 million.

Existing single family decline was -1.9% sequentially and -1.1% YoY (SAAR). The lower line is ex-condo/ex-coops. We saw 360K in condo and coop sales in August 2026, down from 370K YoY and 370K MoM.

The above chart updates the median price for existing single-family homes at $434.8K (vs. $429.1K for total existing). That is above the August 2025 level of $427.7K for single family. The median price in August 2026 is dramatically above the $308K level back in Jan 2021 and $277K in Dec 2019. Mortgage rates were in a different zip code in Jan 2021 and were below 3%.

The above chart shows another angle on the sales mix across the price tiers. We just lift the numbers off the monthly handout for single family homes released by the NAR each month. We highlight the decline of -10.0% in the $100-$250K tier.

Higher price homes and wealthier buyers have had a better time across this cycle. The “K recovery” certainly applies in housing given the mortgage pressure on monthly payments. The medium and select higher price tiers are starting to show some wear and tear.

The general pattern (better heeled buyers are still in the hunt) has fed the dynamic of builders targeting higher price homes vs. starter homes. Meanwhile, the funding costs of a home purchase (new or existing) are a deterrent to “move-up” sales by existing homeowners facing much higher refinancing costs if they are sitting on 3% and 4% handle mortgages. That remains a major headwind for existing home sales volumes as well as new building of move up homes.

The $250K to $750K range is comprised of two tiers that add up to almost 2/3 of the market with the $100K to $250K showing a big share in some of the Midwest states as detailed in an earlier chart.

We looked at the growth trends for each tier earlier. This month was a rough one with 5 of 6 price tiers seeing volumes decline. The lower price tiers are more on the cusp of where affordability and mortgage eligibility could be strained with 7% area handle mortgage rates.

The existing home sales trends in August continue the unfavorable news in 2026 for the housing sector in terms of volumes and prices.

Weekly Tech Check: Semis vs. Software Push-Pull 9-7-26

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

PPI August 2026: Leading Indicator Signaling Struggling

Glenn Reynolds, CFA — Thu, 10 Sep 2026 19:40:42 GMT

Time for an FOMC cut? No pressure from Trump.

The reality of the PPI release line items and the fresh release of inflation variables is that the bottom-up cost line items remain stacked against the weak attempts at political jawboning and trying to paint a positive picture on inflation.
Energy PPI at 24.4% YoY and 4.2% sequentially MoM for August comes before the recent September setbacks with WTI at $102 per bbl as we go to print and diesel in a spike at a national average of $5.98 across a wide range.
The CME FedWatch odds for a Sept hike stands at over 71% today and the 10Y UST at 4.95% is whispering to the Oct 2023 closing high of 4.99% even as Mortgage News Daily survey crosses into a 7% handle just under 7.1%.

We update the timeline for the Producer Price Index Final Demand. The numbers are most certainly not supportive of the “What? Me Worry?” sales pitch from Trump and Vance.

The above table breaks out some of the important PPI metrics that we monitor plus a few smaller line items we like to watch (Construction, Private Capital Equipment). The PPI release provides an extensive and lengthy range of metrics across over 20 pages in the release tables.

The YoY % column offers little support for optimism if you just scan down the list.

The “Final demand” goods” at +7.7%” and “Final demand services” at +4.5% reassures that everything is fine except for goods and services. Bessent must feel better already. Same for Hassett.

Some major “intermediate demand” lines are not reassuring with 11.5% on “processed goods” and 9.3% on “materials and components for manufacturing.” These are tough numbers to feel good about beyond a narrow audience of somnambulists wearing red hats.

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Weekly Tech Check: Semis vs. Software Push-Pull

Glenn Reynolds, CFA — Mon, 07 Sep 2026 23:56:05 GMT

The chart updates our Tech Check mix, and we see the semiconductor names and AI ecosystem asset lines back in charge for the week with software and SaaS taking another beating in the erratic comeback from the “SaaS-pocalypse.”

The Semiconductor ETF (SOXX) placed in the upper end of the second quartile at +2.21% with the Software ETF (IGV) in the bottom quartile at -4.5% for a price return differential of 6.7%. The rankings were less bifurcated than some other recent weeks with some software names also performing well on the week (e.g., Oracle/ORCL, Salesforce/CRM).

The top tier performers saw Dell pull away again with +14.9% on a strong earnings report while Micron (MU), Intel (INTC), and NVIDIA (NVDA) rounded out the semis in the top 5 with Qualcomm (QCOM) and Taiwan Semi (TSM) also in the top tier. ORCL made the top quartile from the software group and as a constituent in IGV and reports earnings this week.

The Mag 7 were spread across the quartiles with 2 in the top quartile (META, NVDA), 1 in the 2^nd quartile (TSLA), 2 in the 3^rd quartile (AAPL, GOOGL) and 2 in the bottom quartile (MSFT, AMZN). As we see in the chart, the broad benchmarks were clustered near the middle with 3 of 4 (NASDAQ, Midcaps, Russell 2000) in the bottom of the 2nd quartile and the S&P 500 just across the line at the top of the 3^rd quartile.

Bringing up the rear was Adobe (ADBE) with Intuit (INTU) in the 2^nd to last slot and Palantir (PLTR) 3^rd to last. The software names comprised 6 of the 8 in the bottom tier joined by Amazon (AMZN) and Broadcom (AVGO), who reported last week. Adobe reports earnings this week. Half of the 14 asset lines in negative range were software related (6 single names + IGV).

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Weekly Returns: Benchmarks and ETFs

Glenn Reynolds, CFA — Mon, 07 Sep 2026 23:07:20 GMT

The chart updates weekly returns on the 32 benchmarks and ETFs we monitor. The positive negative score of 15-17 this week shows some balance but with 6 of 7 bond ETFs in the red. The 4 major benchmarks (NASDAQ, S&P 500, Russell 2000, Midcaps) were concentrated in the 2^nd quartile as the UST curve posted a modest bear steepener (see separate post on the UST curve). The S&P 500 saw the 11 sectors split at 6 negative 4 positive, and one flat.

We see the three energy ETFs in the top tier again with the latest Iran escalation activity and new round of threats. E&P (XOP) was #1 and Energy (XLE) was #2 with Midstream (AMLP) also in the top quartile. WTI rose to $91.48 by the Friday close ($92.70 Labor Day) from $83.40 the prior Friday. Refined products stayed under extreme pressure with diesel hitting a record for Labor Day. That is bad for household discretionary cash flow and bad for inflation expectations.

The tech picture was mixed with the Tech ETF (XLK) making the top quartile on some strong rallies from the AI ecosystem and Semiconductors. We look at our Tech Check list of returns in a separate commentary, but the short form version is the Semiconductor ETF (SOXX) posted a +2.2% week and was ahead of the Software ETF (IGV) at -4.5%. The concentration of the major tech names winning is evident in the Tech ETF (XLK) in the top quartile while the Equal Weight NASDAQ 100 (QQEW) placed in dead last in the group of 32.

Financials held in well with the Regional Bank ETF (KRE) in the top tier and broad Financials (XLF) in the second tier. The recently resilient BDC ETF (BIZD) was in the middle of the third tier with a slight negative. Higher short rates could generate more income for some of the underlying private credit loans but also put more debt service stress on the more troubled exposures.

This week brings CPI and PPI, and that will potentially be a swing factor after the surprisingly strong payroll number (“strong” vs. expectations – not in absolute terms). The FOMC is still about votes and not who Trump dials up every week. We covered the payroll story separately, and the 162K in job additions was slightly below the median line from Jan 2009 and well below typical 2022-2023 run rates. It was a bit overhyped in broader context and the quality of the mix, which we break out in detail separately.

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Duration Daze: Post-ZIRP Bond Returns

Glenn Reynolds, CFA — Mon, 07 Sep 2026 21:33:57 GMT

I grant you 3 wishes to destroy the global economy!

We look at total returns for a few benchmark bond ETFs from March 2022 through Friday close. We use SHY vs. GOVT vs. TLT in a stark look at duration effect differentials.
“LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT…” (Trump’s all caps) is yet another “threat post” by Trump. This one is aimed at the Fed and takes crazy to the next level while shredding most basic economic policy concepts.
The door opens to more scenarios than one wants to ponder. The range of potentially damaging outcomes are daunting.

The chart plots the total returns since the beginning of March 2022 for 3 benchmark UST ETFs. Duration getting punished during that period is certainly not a mystery, but trying to guess the differentials prompted me to plot the chart. Such periods are always worth quantifying.

It is a simple exercise framing short-term UST bonds (using SHY, the 1-3Y UST ETF) with its current 1.85 years duration vs. intermediate term government exposure (using GOVT, the UST ETF) with its 5.58 years duration, and the long duration UST using (TLT, the 20+Y UST ETF) with 14.8 yrs duration as of Sept 2026.

The -31.1% total return on TLT is an eye grabber vs. -1.5% on GOVT and positive returns on SHY at +11.3%. With worries around a potential steepening or upward shift in the UST curve under more than a few scenarios, the pressure to stay short to intermediate remains compelling unless there is a strong view that oil tanks (it might), the FOMC eases, consumers stall, and the economic cycle slows.

Anyone who has been around oil forecasts since the early 1980s has seen the streets littered with high conviction calls on oil prices. The only certainty appears to be that the national debt will keep on climbing, tariffs are more likely to get worse before they get better, and that Trump’s hostile and broadly Neanderthal approach to geopolitics will lead to fewer international buyers of UST.

The journey of the UST curve across the rounds of ZIRP starting with the credit crisis in late 2008, across a muted, relatively brief normalization period into 2018, some fresh easing in 2019, and the return to ZIRP with COVID is a story for the ages in capital markets history. With the world now back in what the “1980s/1990s crowd” might call “normal” the UST returns from the post-ZIRP period from March 2022 above offer food for thought while asset allocators assess the range of potential outcomes ahead. That has a lot of moving parts.

And now for something completely different…

The word “unusual” is the world’s most understated way to describe the combination of current fiscal policy, trade policy, and even potential monetary policy. The threat this past week to cancel trade to coerce the FOMC is not getting enough coverage for how disconnected that threat is from reality and basic economics.

The quote below (note: all-caps are Trump’s) is hard to misinterpret:

“LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT…” - Trump (Truth Social 9-4-26)

It is notable how little coverage was given to those words in the financial media channels (print and cable etc.) who do not want to offend Trump by highlighting his own words (thus embarrassing him) and venturing a guess on what he might be thinking. It is an easy call of “BS.” After all, there is no good explanation that does not insult the President even as his sheep herd says nothing about it.

Anyone can easily see a wide range of scenarios that could unfold in retaliation by trade partners. The most obvious is to withhold critical supplies or slap high export taxes on them. Multiyear projects and order books could be canceled. The “One China” policy could simply lead China to say, “If you won’t trade with me, I am canceling exports from Taiwan, which we now control 100% of.” Goodbye stock market and AI ecosystem valuations.

These are all extreme and doubtful scenarios, but just reread the all-caps threat from Trump and he brings them all to life. He links trade deficits with the fed funds rate. Over the weekend he started in on currencies so “here we go again” (to quote Reagan).

The “oldie but goodie” counter from trade partners is a buyers’ strike on UST (just let the maturities roll off) or sell down some positions on the long end to rattle the UST curve. Remember the regional bank crisis in March 2023 and all those increased losses on long-dated UST bonds? (See Regional Banks: The Credit Crisis Contraction Theme 5-7-23, Banks and Macro Nerves: When Regional Becomes National 3-19-23).

A first grader would see the risk of higher UST rates and inflation risk in Trump’s trade plan/threats. Supply-demand imbalances were one of the main drivers in 2021-2022 along with the Russian-driven energy spike. Massive disruptions in production chains today on the threats would be the reality far and wide in the US. Retail shelves would head toward empty as we already saw with China. It offers a reminder that Trump has learned very little since Trump 1.0.

See also:

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26

Market Commentary: Asset Returns 8-31-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

UST Market: Curve Meets Knuckler

Glenn Reynolds, CFA — Mon, 07 Sep 2026 16:40:28 GMT

The pitch on trade and the FOMC is moving slowly and unpredictably.

The focal point for UST markets in gauging FOMC moves is typically inflation and jobs. The exercise also looks at wage trends (currently painfully low) and supply-demand conditions which are currently constructive except for commodity inflation (esp. Iran and oil) and tariffs. Economically supportive payroll numbers were seen last week with PPI and CPI due this week. The overhyped payroll beat came in slightly below the post-Jan 2009 median but still was better news than the alternative. With jobs, Warsh has one less excuse to pause and wait a month from the Sept (15-16^th) for the Oct (27-28^th) meeting (see Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26).
As we go to print, the odds of 1 hike for Sept stand at 60.4%. The odds of 2 hikes (400-425 bps range) by the Dec 2026 meeting are now 36.7%. The question is whether a median-level jobs month can alter views of more FOMC members away from hawk mode and wait for more data (see Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk 9-5-26).
In the realm of the irrational, Trump’s threat to end all trade with any trade partner with a trade surplus if the FOMC does not ease defies printable adjectives. Just about every major trade partner including the EU, Mexico, Canada, China, and Taiwan would be in that bucket. The fact that Canada is a massive oil producer and resource exporter to the US saw the relatively small Canada goods trade surplus remain somewhat stable YoY through July 2026 to $28.2 billion. That includes ~$56.3 bn in crude oil and a lot of resources the US needs.
If Trump attacks all major surpluses, he must really hate Taiwan, who has seen its trade surplus spike to $127.8 bn through July 2026 from $70.8 bn. That would be a dangerous one that he seldom speaks to. The stock market and AI ecosystem would simply love him using that deficit as an example (he would not dare). Cutting off trade with Canada is impossible given the US resource needs and inflation threats to refined products and fertilizer (and thus food prices).
Taiwan and Canada offer a reminder that there are often very good reasons for trade deficits. Of course, Trump still claims the “seller pays” the tariff, so reality is on a different plane than Trump’s thought patterns. Concept-lite and fact-free is not great for policy consistency as companies try to frame where to commit capex for longer term projects. There will be no Congressional legislative check even if the Democrats sweep the Senate and House. Just a lot of hearings.

For the week, we see a slight UST steepener from 2Y UST to 10Y with a lot of action to come this week with CPI and PPI. We will also get more shrill commentary from the White House ahead of the following week’s FOMC action. The start of Canada tariffs will get a response from the White House and twice the usual number of AI generated imagery (this weekend was especially crazy and extremely militaristic and threatening to the world).

The weekly UST deltas were remarkably unexciting considering the level of noise and heightened pressure on FOMC from Trump and Vance along with the attempts by Bessent to execute on his homegrown shapeshifting strategy out the curve. He has also joined the schoolyard insult game to please Trump when he should be rising above that fray.

Over the weekend, Trump has now waded back into the currency topic with an attack on Canada. That was featured in the trade noise of Trump 1.0 when competitive devaluations were the hot topic. Back then (2017), Navarro was swerving way outside his lane by attacking the euro valuation and Germany with its trade surplus (YTD July 2026 trade surplus by Germany of -$36.9 bn).

Back in Trump 1.0, Navarro cited the weak euro vs. the dollar and a distorted “implied deutschemark” exchange rate. Team Trump appears to be rolling that one out for Canada. Trump also opens a fresh door for Bessent to walk through if Trump stays on the topic. At some point, more of the targeted trade partners will scale back UST holdings. Team Trump can at least celebrate a victory by “fellow travelers” AfD in a state level election.

In a back-to-the-future moment, we now are seeing Argentina rattling its saber around the Falklands again (flash back to Reagan 1.0 in 1982). Trump is supposed to weigh in, so we could see another major European and NATO “ally” clash with the US. Since Trump and his “Donroe” doctrine took wing, this could be one more catalyst for trouble with NATO allies and major UST holders. The UK is outside the EU, so Trump’s ability to wave the tariff flag more narrowly at the UK is a risk if Trump is spoiling for an “Argentina beef” with the UK.

The above chart updates the UST migration from the start of the easing cycle after mid-Sept 2024 up through the pre-Iran curve, and then on into the latest round of inflation and steepening. We detail the yields in the box, and the recent moves are edging toward the Oct 2023 highs on the 10Y.

That Oct 2023 period is a crucial focal point given the peak cyclical mortgage rates that briefly hit 8% in some surveys (see Sept Existing Home Sales: The 7% Solution Running Low 10-19-23). As of Friday, the Mortgage News Daily survey stood at 6.89%. The 10Y UST is only around 20 bps from the Oct 2023 highs, so the housing sector is still in harm’s way subject to any adjustments in mortgage spreads. Iran military action over the weekend remains a wildcard that does not look to go away.

Market Commentary: Asset Returns 8-31-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Payroll Aug 2026: Trouncing Low Expectations is “Positive” with an Asterisk

Glenn Reynolds, CFA — Sun, 06 Sep 2026 01:02:23 GMT

Time to tilt at the trade deficit again…

The payroll relief thickens the plot for the FOMC as Trump threatens to cease all trade with anyone who has a trade surplus with the US unless the FOMC eases. That means the EU, Canada, Mexico, China, and Japan to start (or a majority of US trade) before we move onto the next tier of trade partners.
It is hard to anticipate a rational and orderly closeout of 2026 with respect to the FOMC or the macro inflation inputs (including payrolls) with trade policies still being used like a risk-free instrument. Bat guano demented is the only way to frame the latest outburst with the FOMC meeting slated for 15^th-16^th.
The August payroll numbers were modestly favorable in the context of where they have trended in 2025-2026, and they were naturally exaggerated based on the magnitude of the beat rather than the absolute numbers in recent years. The mix is still mediocre at best in goods (+41K) and the manufacturing subset (+16K MoM, +23K YoY).
The Household Survey data translates into the 4.1% unemployment rate. It is always worth a look at the numerator and denominator in the Household Survey. We see an increase of +115K unemployed for a total of 7,031K and a 4.1% unemployment rate (7,031K unemployed/169,777K labor force). The total employed rose by 569K to 162.746 million. The labor force rose by 683K. The participation rate of 61.6% ticked higher from July (61.4%) but is down from 62.3% In Aug 2025.

The chart updates the monthly deltas in payrolls from March 2022, which means it starts with the end of ZIRP and then into the journey across tightening and eventually the easing cycle. We also flag the median payroll deltas from Jan 2009 of 163K (includes the wave of revisions in older data).

We started the median timeline measurement on Jan 2009 to include the financial crisis and ZIRP period along with the carnage that came with bank meltdowns and assorted bailouts. 2009 also includes the unravelling of various bellwether industrials such as autos and the Chapter 11 spike in the automotive chain (GM, Chrysler and a wave of suppliers).

The 162K payroll adds delivered in August 2026 was triple the forecast consensus and shocked many, but the gross job adds need a frame of reference. It is worth keeping that number in context vs. what unfolded in the tightening cycle and aftereffects of the 2022 oil spike which was triggered by the Russian invasion of Ukraine (that economic trigger point gets almost no airtime from Team Trump on inflation history).

That 162K is slightly below the longer-term median of 163K that we cite even if Aug 2026 payroll additions handily beat expectations and look great by that measuring stick. The 6 negative payroll delta months since Jan 2025 happen to be the only negative months in the timeline presented and all occurred during Trump 2.0.

The negative months are clustered more in mid to late 2025. Only 1 payroll delta since Jan 2025 beats the median (March 2026), but that is unlikely to show up in the Hassett marketing brochure. We see quite a few payroll deltas over 200K with 17 months in total from March 2022 to Dec 2024. We see 8 months above 300K in that time frame. That is the adjective-free scoreboard.

We break out the numbers in more detail below. The summary is that a material beat of consensus takes some heat off the FOMC this month on tightening and especially in the context of the unemployment rate of 4.1% (that would be full employment in any other cycle).

On the other hand, the 3.1% wage growth is underwater vs. inflation, and the payroll additions are still dominated by low multiplier occupation lines such as “Health Care and Social Assistance” and “Leisure and Hospitality.” You can go line-by-line in Table B-1 for the sequential MoM payroll deltas and likewise for the YoY deltas (we do that exercise each month), and the facts are that the granular picture pushes back on the “Golden Year” label. It is more in the base metal family. That is ok since base metals are solid. The marketing of the payroll performance tends to be more gaseous.

The above chart plots the running job adds/declines since Jan 2009 against the unemployment rate, which at 4.1% remains a full employment level even if the Household Survey data (addressed in a separate chart below) is showing material contraction in the labor force denominator.

In the chart, we isolate the worst months of the COVID dislocations in the box for better visuals to capture the other periods. The 4.1% U-3 is below the long-term median from Jan 2009 of 4.9% (5.0% median from 1994).

Payroll counts have been struggling somewhat in relative terms in 2025-2026, but history is very kind to 4.1%. The U-3 is a different exercise than “counting employed heads” in narrow context. As we cover below, the total of employed is down by -624K YoY.

If the 2025-2026 frame of reference for payroll additions is 2024 (not a good jobs year) then the 2025-2026 numbers are acceptable (not great). If we compare 2025-2026 monthly adds to the 2022-2023 period, the current job add run rates are weak.

The above chart details the monthly data dance between the Household Survey Data and the Establishment Survey. The unemployment rate of 4.1% as always has a few moving parts with the total of employed, total unemployed, and civilian labor force all lower YoY.

For those of us who work off the “total paycheck rule” the paycheck count translates into purchasing power – or simply the ability to service growing debt burdens. So this backdrop is not a good one from that angle. “Low hire + low fire” is still not driving a much larger base of paychecks that can move PCE growth materially higher. It is also not a contraction story on the consumer side with negative PCE in fact being quite rare.

The usual high-level focal point around the “body count” metrics is total labor force and participation rates and related deltas. The participation rate is 61.6%, down from 62.3% YoY but up from 61.4% sequentially from July. A growing population and basic demographics should translate into higher total GDP (not necessarily higher growth), higher payrolls in a services-intensive economy, higher production volumes on rising demand (the trick is whether that gets filled by domestic production or imports), and higher total trade flows.

Some weakness in payroll trends in 2025-2026 can be tied to local distinctive factors such as local education seasonal patterns, but we are seeing YoY declines in local education even with the MoM increase. We will look at more occupation lines separately below, but the +62K bounce MoM in “Leisure and Hospitality” was a big help. That included +131K YoY.

The theme of “low hire, low fire” is still playing out but against a backdrop of weak affordability as covered in other commentaries. Wage growth has been lagging inflation (or slightly over/under inflation) by various metrics. The latest wage growth rate of +3.1% was down from +3.2% in July in the BLS payroll release. That is below headline PCE inflation (3.7%) and headline CPI (3.4%) for July. That is negative real wage growth, and that is a tough comparison for midterm elections. We get fresh August CPI and PPI data this coming week.

With its 1-month lag, the JOLTs release added some mixed news ahead of the August jobs numbers with lower hires set against modestly higher openings. For July, hires were down in Manufacturing (-45K) but higher in Construction (+47K) while job openings were notably higher in Manufacturing including +76K in Durable Goods.

Layoffs and discharges were lower in total with a minimal decline in Manufacturing. “Openings” are good in what they reflect about employer plans, but the actual hires might need some tumblers to fall into place including FOMC plans, oil prices, and tariff behavior. Those are all moving parts right now with some potentially moving more than others.

We detail payroll deltas in the “Goods” bucket across Construction, Durables, and Nondurables for a reality check on sequential MoM deltas and YoY. The exercise is in part a check on how targeted tariffs translated into jobs (or not).

The headline +162K in payroll adds crushed expectations as detailed earlier. However, that outperformance was still slightly below the median since Jan 2009 (+163K) and well below 2022-2023 deltas. Services dominated with +86K in Aug with Government at +35K, comprising +121K of the +162K. The remaining +41K was in Goods with more than half (+22K) in Construction, which has been a winner MoM and YoY on the AI ecosystem boom. We include some subsector lines in construction detailing material moves higher (Nonresidential) and some lower (Residential).

A key point to consider is any weakness in the blank check tariff sales pitch where tariffs alone bring their own reward. The stated goal of reshoring and attracting capital investment back to the US is sometimes complicated by the reality that a project needs to be “economically viable.” Reduced price competition can also lead to domestic producers simply raising prices. Bricks and mortar commitments whether greenfield or brownfield have to consider that the “next guy” could radically overhaul trade policies when such reshoring or new capacity can take years to complete.

Services payroll totaled 114.2 million, dwarfing Goods at a 21.6 million headcount. Within Goods, we see Construction at 8.4 million in total payroll and Manufacturing at 12.6 million. Manufacturing includes Durables at 7.9 million and Nondurables at 4.7 million. We do not address Mining and Logging here with its headcount of only 609K heads (“mining” includes E&P, coal, metals).

Durables captures attention given the multiplier effects from materials and supplier chain tiers into finished goods that can also bring more headcount in services across freight and logistics, retail (dealers) and financial services (wholesale/retail financing, insurance, etc.).

The table is self-explanatory (what’s up or down MoM and YoY), but we highlight the material difference between Durables over the past year at +72K vs. Nondurables at -49K.

The fact that Motor Vehicles jobs (963K total payroll Aug 2026) contracted YoY might surprise, and the latest autos and parts total payroll number is also below the end of 2024. Furniture is a smaller line (331K) that has gained a lot of tariff attention, and that was lower YoY and below year end 2024. Even if higher YoY, Machinery (1.09 million) is below Dec 2024.

In Nondurables, the tariffs on such line items as Apparel have not translated into more jobs any more than textiles. These are two areas where low-cost labor is the main story line (notably in Asia). The Apparel payrolls decreased while prices rose. Food Manufacturing stands out as a setback at -20.4K YoY. Food prices are rising with the potential for more of the same ahead with a diesel crisis underway and labor costs remaining a wildcard in the agricultural space with the deportation waves. It is never simple even if some pretend it is.

The moving parts of the Services payrolls tend to dominate the headline deltas with “Health Care and Social Assistance” and “Leisure and Hospitality” the more active lines each month. The health care lines are diverse by subsector as detailed in the table. The social assistance line is heavily about demographics. The growth in headcount mirrors the massive role in the US economy with health care related industries totaling around 18% of GDP. There are parts of the health care growth story that can have huge multiplier effects across the supplier base and others that do not but instead are more personnel intensive.

For Hospitality and Leisure, “Food and Accommodation” dominates with +185.1K YoY. Within that broader mix, the “Food Services and Drinking Places” line (12.4 million total payroll) was +59.2K on the month and +181.8K YoY. Within the broader Leisure line items, we see “Arts, entertainment and recreation” lower by -6.3K MoM and -53.8K YoY on a total payroll base of 2.65 million.

Among notable declines in Services lines was “Information” at -23K MoM and -115K YoY. Financial activities was down -11K MoM and -99K YoY. Within the Financial bucket, Insurance carriers and related activities were down by -6.3K MoM and -75.4K YoY.

The jobs deltas saw the U-3 slightly above the 4.1% line (4.14%). The U-6 posted a favorable decline in August to 7.7% from 7.9%. That compares favorably to the 8.1% of August 2025 for a -0.4 YoY decline.

As a reminder, the U-6 metric is defined with the numerator as “total unemployed + persons marginally attached to the labor force + total employed part time for economic reasons.” The denominator is “civilian labor force + workers marginally attached to the labor force.”

As we covered earlier in the YoY deltas and the Household Survey data, the civilian labor force is down sharply YoY with the category of “not in labor force” spiking during 2026 but declining sequentially in August by -551K to 105.6 million from 106.2 million in July. “Not in labor force” can be as simple as someone who wants a job but is not actively looking. The turmoil in the tech services headcounts of late and downsizing of government departments are easy ways to envision why this trend has been unfolding in 2026.

The U-6 is the structural underemployment metric that is always useful to watch. To start 2025, the U-6 rose sharply in Feb 2025 to 8.0% from 7.5% in Jan 2025. The U-6 jumped to 8.7% in Nov 2025 from 8.1% in Sept 2025.

The current 7.7% marks a decline from 8.1% in May and 8.2% in April. That is good news. However, the current U-6 remains well above the 6% handles seen in spring of 2023. The U-6 is still below the median from 1994 of +9.3%, which notably includes the post-crisis shock and the longest recession since the Great Depression.

The time series above updates the U-6 minus U-3 differential as a measure of relative employment quality and to flag risks of major dislocations in large swaths of the economy (think oil patch collapse in the late 1980s, tech bubble imploding into a weak 2001-2003, and financial services and automotive meltdowns in 2009).

The current 3.6% differential is below the long-term median of 4.0%. The job ranks are still vulnerable now with stubbornly uncertain and erratic developments in Iran and apparent interest from Trump to make more reckless trade attacks including threatening this week to end all trade with all trade partners posting a surplus. That was crazier than usual (even for Trump) since that target list includes all the largest trading partners and a material majority of the Top 20. Such a radical action would in theory generate some major problems in planning payrolls and would lead to mass layoffs.

The anxiety around where the UST curve, energy costs, and raw materials go from here remains high in terms of the impact on working capital cost inputs and employer decisions. The feedstock costs have been ugly until the recent adjustments in more than just oil. Iran peace promises are often heard as settled, but “it ain’t over ‘til it’s over” clearly applies. The housing sector remains quite vulnerable to any UST steepening risk. The recent return to exchanging fire in the Strait continues the on-again/off-again pattern.

The above chart updates total payroll vs. the unemployment rate. The trend needle has not moved much in 2026 and has been in a narrow range. More bodies with more paychecks are always a good thing. Meanwhile, the Household Survey data pushes back on the Establishment Survey with the direction of total employed heads.

The trick from here is how the consumer deploys their paychecks and whether the zero-sum realities of household budgets undercut spending. The PCE line in the GDP accounts is a critical driver of growth and negative real wage growth is not a tailwind. In reality, poor household earnings growth can be a leading indicator for spending or wage demand pressure.

PCE growth represents 68% of GDP, so the improvement in 2Q26 GDP after a very weak 1Q26 GDP offered some tangible cyclical relief (see 2Q26 GDP: Good Underlying Numbers Despite Headline 1.5% 7-30-26, GDP 1Q26 Final: PCE Growth Plunge 6-25-26). We also saw constructive PCE income and outlays numbers in the July PCE release with income outpacing consumption (see PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26). Savings rates finally ticked higher, but questions remain on when (and whether) the consumer will get more defensive.

The above chart updates the total payroll numbers vs. job openings. Management teams have a lot of moving parts to factor into planning whether quantitative or qualitative before they fill the openings. The potential for a wave of new tariffs ahead with the USMCA demise (or replacement) and the escalating clash with Canada and potentially the EU are not incentives for employers to rush out and fill the job openings or to launch more initiatives where the economic inputs are in a state of flux.

The domestic political stress is likely to climb from here. The US is in an election year where political risk is rising to levels that the US has not seen since 1860. Election interference worries and the insane idea of having the incredibly inefficient Postal Service being a White House enforcement entity to undermine mail-in voting is getting into uncharted territory (in the US at least) even if Asia and European dictatorships have some templates across history.

Not enough people have looked at how complicated the Executive Order was in terms of its demands on the USPS even if the whole idea is brazenly unconstitutional and conflicts with the “Elections Clause” of the constitution (see The US as an Aspiring Emerging Market: Fiscal SNAFU, Political FUBAR 4-6-26).

The final IEEPA decision from SCOTUS came in against Trump, but he was prepared to start slapping on tariffs under Section 122, 232, and 301. More recently, Trump has unearthed a clause within the Smoot Hawley tariff legislation of 1930 using Section 338. When in doubt, a natural plan is to go to the Hoover playbook (that worked so well). Section 338 is a return to the blank check tariff policies of IEEPA with zero Congressional checks on the White House.

The near-term trade crisis is Canada with Trump’s Homeric ego a critical factor. The trade flows have been looked at in many past commentaries and the risks are obvious at this point (see Trade Deficits: The Moving Parts and Macro Goals Matter Most 6-24-26, Meanwhile…Back in Economics and Tariffs 3-2-26, US Trade with the World: Import-Export Mix 2-25-26). The US has a goods trade surplus with Canada ex-oil. Canada is also the leading export market for almost 3 dozen US states. Those states, including every central and northern swing state, might have something to say about the game plan reflected in midterm elections.

CPI vs. unemployment rate is plotted above. The big worry back in March as Iran escalated was fear of stagflation – something not seen since the 1980-1982 double dip under Volcker (except a brief touch of worry in fall 1990). That has subsided in recent weeks despite the stubbornly high inflation numbers. It would take a massive setback in US-Iran escalation risks to change the status quo, but the refined product crisis has recently eclipsed discussion of the Strait. At some point, China will ramp up buying oil on a grand scale again. This oil and refined product crisis is proving to have some legs.

The overall economic impact of tariffs has been far less than feared given the reality that most trade partners backed down in 2025. That said, the trade war with Canada in 2026 could lead to more disarray. A worsening backdrop will be tied to how key Provinces react and whether they hold their current steady-as-she-goes plans (i.e., no export taxes on oil or potash, etc. by Alberta and Saskatchewan).

The backdrop could still change in 2026 with the latest wave of Section 301 and Smoot Hawley 338 attacks on supplier chains and trading partners. There is always the chance that Trump might push Mexico too far and the same with the EU, where US relations are at a low. The worst case scenario in trade would be trade wars with the top 3 trading partners (EU, Canada, Mexico). Trump would keep on making money, but employers would need to revisit hiring and staffing plans.

See also:

Remembering Gloria Steinem 9-3-26

Market Commentary: Asset Returns 8-31-26

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Remembering Gloria Steinem

Glenn Reynolds, CFA — Thu, 03 Sep 2026 15:02:09 GMT

Market Commentary: Asset Returns 8-31-26

Glenn Reynolds, CFA — Mon, 31 Aug 2026 20:13:55 GMT

The Oil Anschluss demands 65 billion barrels you say?!

The Warsh speech carried the week, but inflation stayed stubborn as the UST curve rolled into a bear flattener with FOMC tightening odds quickly moving higher over the course of a week for a Sept hike and for 2 hikes by the Dec 2026 FOMC meeting (see Market Commentary: The Curve 8-30-26).
For the week, the PCE inflation numbers were unfriendly and remain well above target. That pressure continues to hold back bond returns and undermine confidence in interest rate sensitive assets. Housing also posted more weak numbers (see PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26, 2Q26 GDP: 2nd Estimate 8-26-26, New Home Sales July 2026 8-25-26).
The week saw low returns across benchmarks and subsector ETFs in a compressed Hi-Lo range. Muted numbers were posted by the tech highfliers even with NVIDIA posting spectacular earnings. The software sector sustained its slow and steady recovery while the AI ecosystem saw a “pause” for the week in a fast-forward year.
We get payrolls this week after a barrage of data last week that includes PCE inflation (income and outlays) and 2Q26 GDP updates that also showed materially unfavorable inflation trends in 2Q26. That came along with a soft headline number of 1.5% that includes supportive PCE growth and fixed investment numbers in the moving parts that were more reassuring than the headline growth number would suggest.
The Venezuela deal was a headline grabbing anomaly as the theme of annexations and trade extortion has colored US economic policy and geopolitics. In the Venezuela case, private ownership structures scream corruption risk and future political turmoil. Based on what we have seen, even the Pentagon is getting their “piece of the action” as the private and public sector lines get very blurry.
The value maximization equation for US interests in Venezuelan oil could easily clash with the concept of free and fair elections in Venezuela. The US is essentially seizing oil assets by cutting a deal without an election. It will be written up in the future for what it is – military-based expropriation with cash and prizes for the Pentagon and corporate allies of the White House.

The above table details the time horizon returns for the debt and equity benchmarks we monitor. It continues the pattern of solid equity performance and soft fixed income numbers we have been seeing with the Russell 2000 stalling the past month. Tech remains a story with major swings week to week.

The tech bellwethers had a solid week led by software and SaaS names with only a few major names in the red with Tesla (TSLA) still volatile and negative YTD. The Semiconductor ETF (SOXX) was one of 3 tech-heavy lines in the red with TSLA and Taiwan Semi (TSM). We see 6 of the Mag 7 in positive range. The Software ETF (IGV) was ranked #2 in this group at +5.93% with SOXX near the bottom.

We get Dell (DELL) and Broadcom (AVGO) earnings this week for another pulse check on Semi and AI ecosystem names. After the 1% handle return on NVIDIA (NVDA) this week and in the face of an amazing quarterly earnings report, the AVGO reaction will be illuminating about market sentiment. SOXX is now -10.65% over 3 months vs. +69.1% YTD.

The chart updates the weekly total returns for the 32 benchmarks and ETFs we monitor, and we see a balanced score of positive vs. negative at 15-17. The absolute total returns on the leaderboard are extremely low in the context of recent weeks and months.

We see a +1.43% return earning the #1 ranking with Communications Services (XLC) and the weekly return dropping below 1.0% in the top quartile at #5 (Midstream ETF AMLP). The Hi-Lo range for the 32 asset lines was only 3.41%.

The same sub-2% profile holds true on the bottom with last place Health Care ETF (XLV) at only -1.98% with E&P in 2nd to last at -1.90%. Considering the headline intensity, the returns were muted. We had Warsh at Jackson Hole, NVIDIA earnings, the PCE inflation release, updated 2Q26 GDP and related PCE inflation for the quarter, and oil dropping from an $87 handle to $83 handle. One might have expected more action.

With the exception of the long duration UST 20+ ETF (TLT) in the top quartile at the #4 ranking with +1.01%, the remaining 6 bond ETF returns were clustered near the 0% return line. The IG Corporate ETF (LQD) was in the 2nd quartile and was the #2 performer among bond ETFs at only +0.41%. We see GOVT at #5 among bond ETFs with +0.04% with the lowest returns of the 7 bond ETFs posted by the short UST 1-3Y ETF (SHY) at -0.13%.

The short end of the UST curve saw the worst UST deltas coming off the Warsh meeting on Friday while the 30Y hung in much better despite debates around the Bessent UST curve liability management gambit. We cover the UST deltas and Bessent actions in other posts (see Market Commentary: The Curve 8-30-26 ).

For all the excitement around the dazzling NVIDIA (NVDA) earnings report, the tech needle did not move much on the week with NVDA at a +1.32% price return for the Tech ETF (XLK) at only +1.3% holding down the #2 ranking here. NASDAQ made the top quartile with only +0.85% and the Equal Weight NASDAQ 100 (QQEW) made the top tier with only +0.68%.
The broad market S&P 500 was down in the 2nd quartile with 7 of 11 sectors in the red but edging into positive on a good week for Tech, Financials, and Communications Services among 3 of the largest sectors in the benchmark. The Russell 2000 dropped into the red and the bottom quartile with Midcaps (MDY) sitting at the bottom of the 3rd quartile.

The losing side includes Energy names (XOP, XLE) with the oil price drop and odds shifting for some resolution in the Strait. That just hit a speed bump by Monday with fresh clash and new exchanges of fire. There was some pressure on interest rate sensitive sectors such as Homebuilders (XHB) and Real Estate (XLRE). Homebuilders also reported a major drop in new home sales. Health Care (XLV) had a bad week and a mediocre month but is still #1 over 3 months and near the middle of the pack YTD.

The tech check mix we monitor had a solid week with a 20-12 score led by a rally in the software and SaaS names that comprised 6 of the 8 top quartile names including Microsoft of the Mag 7. Those were joined in the top tier this week by two other Mag 7 names in Meta (META) and Apple (AAPL). We see the Software ETF (IGV) ranked #4 on the week at +5.93% well ahead of the Semiconductor ETF (SOXX) in the bottom quartile at -2.20%.

Salesforce (CRM) was the outlier on the week at #1 with +22.4% with ServiceNow (NOW) a distant #2 at +12.6%, which was well ahead of #3 Microsoft (MSFT) at 6.3%. Adobe (ADBE) and Palantir (PLTR) also made the top tier. CRM, NOW, and ADBE remain in negative return range on a YTD basis while PLTR is slightly positive YTD at +4.8%. The long road back is steady and is getting attention from value seekers for what many consider an early overreaction.

CRM reported a very strong quarter and cited growth plans in its agentic AI business. As a CRM competitor, NOW hitched a ride on the CRM numbers.
This week continued the slow and erratic rebound for those software and SaaS-based services names that were battered in the “SaaS-pocalyse” that was tied to a massive disruption of business models and “AI replacement theory.” Market watchers highlighted how the fears around such enterprise software names had grown neurotic and overdone.

The semiconductor and AI ecosystem names were beat up in relative terms this week with Applied Materials (AMAT) in the bottom quartile and 4 of the 8 bottom tier names tied into semis. We also see the Russell 2000 and Midcaps (MDY) in the bottom tier with Cisco (CSCO), Intel (INTC), and Taiwan Semi (TSM) in negative return range just across the line in the bottom of the 3rd quartile.

This week has Dell (DELL) and Broadcom (AVGO) scheduled for earnings for a fresh gut check on volume and pricing trends tied into the data center end markets and overall “AI trade.” DELL was steady this week while AVGO was barely positive even with the stunning earnings growth posted by NVIDIA (NVDA). NVDA only posted a +1.32% week even with the impressive numbers.

The tech-heavy NASDAQ (+0.85%) and S&P 500 (+0.49%) were both positive this week but with minimal returns in the 3rd quartile. The Mag 7 names were spread out again but with 3 in the top tier (MSFT, MET, AAPL) this time, 2 in the 2nd quartile (AMZN, NVDA), 1 in the 3rd quartile with Alphabet (GOOGL), and Tesla (TSLA) 2nd to last near the bottom at -3.89%, just ahead of Applied Materials (AMAT) in last place.

The 1-month returns for the broader group of 32 asset lines posted a score of 20-12. The E&P ETF (XOP) and Energy ETF (XLE) topped the leaderboard as upstream equities get wagged by Iran deals/non-deals and Trumpian jawboning on expectations. The monthly oil prices stacked up favorably vs. the measurement dates for the month with this latest week showing a decline.

With shooting underway again over the last 24 hours and hostilities not going anywhere anytime soon, we got a fresh oil price rise today to just under $86 from Friday’s $83. This latest flareup included comments on “mines” so that makes it more serious than just firing at ships in terms of what it means for Iran’s strategy from here. We work under the assumption that Trump has no set plan while Iran likely does.

Oil worries flow right into Warsh and FOMC handicapping as well as for investors framing UST curve steepening risk and what that means for fixed income allocations. For the trailing 1-month, bond ETFs saw 4 of the 7 we track in negative return range with the other 3 under +1.0% including 1 with a return of +0.25% (SHY, 1-3Y UST) and 1 with a return of +0.12% (EMB, EM Sovereigns).

The top quartile had some tech-heavy concentrations with the Tech ETF (XLK) at #3, the Equal Weight NASDAQ 100 (QQEW) at #4, and NASDAQ at #5. A top tier performer for the month that might surprise was the BDC ETF (BIZD) at #6 as earning season brought news that was negative but not as negative as the pricing appeared to anticipate.

The flip side of the bad bond performance was the concentration of interest rate sensitive asset lines in the bottom tier as dividend heavy names were hit with Utilities (XLU) and Consumer Staples (XLP) along with Real Estate (XLRE). Housing has been getting hit with a streak of bad news with Homebuilders (XHB) also sitting in the bottom tier (see New Home Sales July 2026 8-25-26, Housing Starts July 2026: Grim Numbers 8-18-26).

The tech check mix had a good 1-month period at 26-6 with a few notable exceptions. We see the software names come roaring back as discussed along the way in our weeklies. For the 1-month stretch, we see 7 of the 8 software related names with DELL making it into the 8^th slot in the top quartile. The Software ETF (IGV) posted +19.31% for the month vs. +3.59% generated by the Semiconductor ETF (SOXX) over the same time period.

The semiconductor and AI ecosystem bellwethers were generally on the weaker side of the monthly median with negative returns for Cisco (CSCO), Broadcom (AVGO), and Applied Materials (AMAT) in the red.

The 3-month scoresheet for the broader group of 32 asset lines posted 20-12 with a diverse base of subsector ETFs in the top quartile that included Health Care (XLV) at #1 and Financials (XLF) at #2 with Regional Banks (KRE) also making the top tier. A supportive view of asset quality and cyclical dynamics are evident in the BDC ETF (BIZD) making the top tier.

Interestingly, the Tech ETF (XLK) was down in the lower end of the 3^rd quartile with some of the highflier retrenchments during that measurement period. That same effect sent the NASDAQ down into the bottom quartile. An exception was the Equal Weight NASDAQ 100 ETF (QQEW) which made the top quartile with less issuer concentration.

The YTD return table for the broad group of 32 posted 25-7 in what is a very good year for equities by any standard. When you consider that 4 of the 7 negative returns are bond ETFs and 5 of the 8 in the bottom quartile, the fixed income allocation has been a challenge from a short-term time horizon perspective. Duration lost and dividends saw value erode, and valuations in tech can face pressure if that trend stays in place.

Where we go from here in bonds as usual is about “expansion vs. recession” and about “inflation vs. price stability.” Across history (and for those of us who came of working age during the stagflation days), the dagger for bonds can be oil prices. That includes downside risk for the consumer sector and less favorable project economics that come with the natural pressure on long rates. The secular capex boom for the AI ecosystem might save the project economics, but it also can keep fueling demand and inflation.

The trick for economic policy leadership is not being stupid enough to start a war in the Middle East or attacking Iran. Middle East disturbances have been know to bring risks like stagflation such as the Arab Oil Embargo fallout (4Q73 to 1Q75), the post-Iran crisis 1979 fallout in the 1980-1982 double dip, and the brief 1990 recession onset. Team Trump did not get the memo.

The YTD tech check mix posted a YTD score of 22-10 with the AI ecosystem ruling the top quartile and software and SaaS-based service operators dominating the bottom quartile. The 10 negative returns run from Salesforce (CRM) at -3.36% down to Intuit (INTU) at -45.95%. We see 6 of 8 names in the top quartile tied into semiconductors (MU, INTC, AMD, AMAT, SOXX, TSM) with broader AI ecosystem names such as DELL and CSCO rounding out the top 10.

Even with recent setbacks, the chart highlights the off-the-chart numbers on the leaderboard. The top quartile runs from Dell (DELL) at +262.4% to earn its #1 ranking down to Taiwan Semi (TSM) at the bottom of the top quartile with +27.39%.

The wild run for tech in this cycle is led by much healthier companies than the halfway house of origination ahead of the 1999 NASDAQ boom year (+86% return that year for NASDAQ). Valuations back in 1999 were dependent on forward valuation assumptions that would not come close to being realized.

When some people cite “tech bubble” of the late 1990s, they mean internet stocks. For those living more in the credit world, they are referring to capex-intensive media and telecom names that were borrowing to plug the gaping hole in cash flow that was tied to betting the ranch on tech rollouts (e.g. wireless broadband, etc.) or capital spending on cable/fiber and M&A.

In the current cycle, this time the “after capex bleeders” are much larger and healthier credits – even if they are getting less healthy in credit very quickly with financial debt or lease adjusted debt. The numbers are radically larger as the headlines have been covering. That is, to the point that IG mega-borrowers are rattling the UST supply-demand balance.

The LTM score of 29-3 includes only Homebuilders (XHB), BDCs (BIZD) and the long duration UST 20+Y ETF (TLT) in negative return range.

The top quartile includes 3 from energy subsectors (XOP, XLE, AMLP) with Tech ETF (XLK) and Base Metals (DBB) also in the mix of commodity supply-demand imbalances of all types flowing into products such as base metals (aluminum, copper).

It is reassuring to see Health Care (XLV), the small cap Russell 2000, and Transports (XTN) in the mix for some semblance of breadth. This is one chart where “one investor’s win is another investor’s losses” given how energy and commodity costs are undermining costs and price stability.

See also:

PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26

Market Commentary: The Curve 8-30-26

Glenn Reynolds, CFA — Sun, 30 Aug 2026 20:11:17 GMT

I know where you live new guy…

Warsh gained a lot of credibility with the markets this time around just by simply locking in on the incredibly obvious reality that the country has an inflation problem where the FOMC needs to play its role. It was a low bar to clear to state inflation is a priority, but it was being questioned whether he would clear that bar given Trump’s pressure.
The market reacted with a material increase in the odds of a Sept FOMC hike rising to 59.7% as we go to print, up from 39.9% 1 week ago. For the later Dec 2026 FOMC target, the odds of no change were down to 10.9% from 28.4% 1 week ago with the probability of 1 hike at 38.3% and 2 hikes at 40.1% (vs. 22.8% a week ago). The odds of 3 hikes by Dec 2026 stand at 10.7% vs. 3.5% a week ago. That was obviously a Jackson Hole speech the market believed.
The inflation inputs this week were negative with the July 2026 PCE price index flat YoY and showing no progress. The MoM lines were not helpful. The 2Q26 GDP release last week also updated the 2Q26 PCE inflation numbers (not to be confused with the July monthly PCE inflation rate) with both revised higher for the quarter (see PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26, 2Q26 GDP: 2nd Estimate 8-26-26).
The housing sector has been feeling the pain from mortgage rates and rising costs in the building materials chain from tariffs. The week ended with the Mortgage News Daily Survey at 6.81%. Weak new home sales were reported last week that followed poor home start numbers the prior week (see New Home Sales July 2026 8-25-26, Housing Starts July 2026: Grim Numbers 8-18-26).

The comments below are a cut and paste from a weekend LinkedIn post with edits:

The chart breaks out the weekly UST deltas after a few busy days that included Warsh at Jackson Hole, a sharp drop in oil prices, and more UST curve crosscurrents with Bessent thinking he can play puppet master with the UST curve shape. We saw a mixed update on PCE inflation and income and outlays for July. The 2Q26 GDP release saw quarterly PCE inflation revised higher (by +0.2 bps) as PCE inflation rose to 5.3% headline and 3.6% core. For July alone, PCE inflation was flat at 3.7% headline and 3.3% core (see PCE July 2026: Mixed Consumption, Stubborn Inflation 8-26-26, 2Q26 GDP: 2nd Estimate 8-26-26).

The 1-week UST move was a bear flattener with the 2Y at +12 bps, 5Y at +5 bps, 10Y -1 bps, and 30Y -5 bps. The Friday move after Warsh’s morning speech flowed higher along the curve. For the day, the 2Y posted +12.8 bps, 5Y +9.5 bps, the 10Y +5.8 bps and 30Y UST only +2.2 bps.

The hands-down winner on UST impact was Warsh gaining more credibility with the market on his willingness to support tightening and perhaps even swinging more FOMC votes in that direction for a September FOMC tightening.

As noted in the bullets, FedWatch shows a material increase in the odds of Sept FOMC hike rising to 59.7% as we go to print, down from 39.9% 1 week ago. For the later Dec 2026 FOMC target, the odds of no change were down to 10.9% from 28.4% 1 week ago with the probability of 1 hike at 38.3% and 2 hikes at 40.1% (vs. 22.8% a week ago). The odds of 3 hikes by Dec 2026 stand at 10.7% vs. 3.5% a week ago. That was obviously a Jackson Hole speech the market believed.

The relatively brief Warsh speech did not include much (“Here is a quick overview of what I’ll cover in my remarks this morning. You can call it an outline . . . you can call it a trail map . . . just don’t call it forward guidance.”). The focus was an assertive commentary that more had to be done to get inflation down. That sold the market (for now) after reports of regular calls from Trump to Warsh raised fears of intimidation.

As covered in past commentaries, the cyclical risks of tightening during economic peaks can lead to major market setbacks. The durability of this current cycle gets framed around whether the AI ecosystem investment boom will trump the struggles of the consumer.

Consumers have proven more resilient in 2Q26 and the summer relative to where they started out in 1Q26 with weak PCE growth. Real wage growth has been straddling zero, and that is a wildcard for FOMC policy if wages join the product and services inflation and any pressure from a new wave of tariffs is felt with Canada trade war risks as Mexico is also teed up for USMCA review.

Inflation was stubborn in July for CPI and PCE and above target, and related AI multiplier effects and capex have supported the chain from materials to finished goods and myriad services. Fixed investment in Equipment and Intellectual Property Product lines in GDP drive that home. Construction, Freight and Logistics, and Financial Services have been beneficiaries. This is an unusual cycle from many different angles even if the consumer and lower part of the “K” are feeling pain. Housing is weak and will see costs rise as well even as mortgages are a headwind. Oil will remain the least predictable.

The chart above updates the running YTD UST deltas and tells an obvious story of adverse trends on the back of stubborn inflation, fallout from the Iran War, steady jobs, and resilient demand. The bear flattener from 2Y to 10Y follows sharp moves higher in short term working capital financing. The higher cost short duration financing hits customer financing in such key areas as consumer durables and increased costs of securitization for the corporate sector.

The above chart hammers home how we got there – Iran was the driver.

The pre-Iran UST deltas remind us of the systemic cost of the Iran mistake as the market was seeing lower rates and a downward shift ahead of the late Feb 2026 start of bombing and ensuing war.

The chart above and those that follow are for memory lane purposes. This chart will be part of the regular updates since it tells a story of historical context and the migration from 2020 across the tightening cycle to the Oct 2023 peak rate on the 10Y then back across the easing cycle in 2024-2025 through current times.

The UST history can be framed against today’s curve and other notable credit market timelines during the economic and monetary cycles of bygone years. The charts offer context on absolute yields and UST curve shape. The scenario checklist to wrestle with on the direction of the curve includes “flatter via FOMC tightening with a steady long end” vs. “upward shift” or “steepening on more inflation pressure from higher oil.”

In the above chart, the move from 12-31-20 and ZIRP across the inflation and tightening cycle of 2021-2022 is clear enough in the move from 12-31-20 to 3-1-22. That came just ahead of the mid-March 2022 start of the tightening cycle and end of ZIRP. The long end is driven by the market, and that vote from the market was obvious.

We like to highlight 9-16-24 UST curve to timestamp what was unfolding immediately before the easing cycle kicked into gear in Sept 2024 through Dec 2024 (see Footnotes & Flashbacks: State of Yields 12-29-24 ). That was when the 10Y was around 3.6% and mortgage rates were near 6.0%. That was around 7 weeks before Trump won the election to take his role in Jan 2025 in a peaceful, uncontested transfer of power (i.e., light on violence and Capitol sackings).

As noted in the above chart, the bear steepening on the long end was a force during 2024, and it has been hard to resist that UST bias across time into 2026. The steady economy and inflation back on the rise from the end of Dec 2024 meant steepening was hard to resist. The 10Y and 30Y UST deltas have not been moving in the right direction even though mortgages are not back to fall 2023 levels. The 30Y mortgage rates as of today was just over 6.8% (6.81%) using the Mortgage News Daily survey.

The above chart updates the 30Y UST vs. the dollar index (DXY). That is getting back into focus again as the UST supply pressures and “other worldly” deficits are felt and national debt just keeps on rising. Combined with new milestones in debt levels (the “$40 trillion and climbing” reality), those headlines are tough to counter.

The US Treasury General Account can only buy so many long bonds, and the tendency of Trump to alienate the existing base of international investors makes the currency issue an important variable. Threats this past week on dollar clearing (SWIFT) for those countries that do not submit on Iran’s “Economic D-Day” offered a fresh reminder to the BRICS alternative payment system advocates. That will be back in focus near term as the US and Canada have a trade war, the Mideast is in chaos, and the EU sorts out how much they hate the US (or which country hates us the most). It is getting competitive.

The rule of thumb is that higher yields and economic growth bring a stronger dollar, but higher rates from inflation and UST supply-demand imbalances are a separate story. With Warsh viewed as heavily biased toward easing (if truth serum was administered), this past week’s speech was a relief to the inflation hawks.

Meanwhile, a new wrinkle has been Bessent looking to stabilize long rates through US creative buybacks. Bessent waving the “buyback flag” started out as an “Operation Twist” version (borrow short, buy long bonds) before it quickly shifted to a focus on using US Treasury balance sheet liquidity from the General Account. Both plans were widely panned.

The recurring issue of record debt and steady, dramatic budget deficits are hard to shake. The deficits emanate from massive spending and shortfalls that flow into the sovereign balance sheet. That means more borrowing. The UST market is a line of credit funding fiscal mismanagement.

Meanwhile, the wildcard of oil prices haunts the long end and can infect the inflation targets that dictate the FOMC actions. Tightening would drive interest costs higher on the short-term funding costs from higher short UST. The bear flattener of this past week offered a reminder that the market believes Warsh might be serious about higher rates.

The above chart is one we include as a memory jogger on the troubled journey from COVID and ZIRP across the tightening and easing cycles. We detail the easing and tightening actions by month and magnitude across time in the boxes.

Trade wars and tariffs will play a role, and that is getting worse. Wages have been an X factor in past inflation cycles and that has not arrived (yet). Many eyes are looking for any hint of wage pressure that has not shown up at all at this point (see Payroll Deltas July: Mixed Bag, Mediocre Numbers 8-9-26). Negative real wages in a steady economic cycle are supposed to move the needle higher on wages, and that affordability discontent can show up in politics (election year) and policy decisions. Collective bargaining also can play a role.

The above UST history revisits the shift from the Carter inversion and peak of 1978 across the stagflationary 1980-1982 double dip that kicked off after an Iranian oil crisis in 1979.

We see the 9-16-24 UST curve sitting on the bottom during the late stages of the Biden administration, but we suspect Trump, Hassett, and Bessent will not be flagging that memory. After all, the UST curve had sent mortgage rates higher again after team Trump was put in office. That does not change the fact that we are still well below the peak mortgage rates of Oct 2023.

One of the key takeaways from history is that flat curves that arrive after some FOMC tightening in a cyclical peak can lead to trouble. The question will get louder if the Fed tightens by year end.

Worries get worse if we start to see an inversion. Credit market peaks such as the transition across 1989 into 1990, the move into 2000 after a +86% NASDAQ year in 1999, and the tail end of 2006 on the way into 2007 all make for some interesting compare-and-contrast drills.

We look at some of these histories in the links at the end of this commentary.

The above offers some more granularity on the migration from 9-16-24, across the pre-Iran war period and then to the current post-Iran Friday close. We include the UST curve from the peak 10Y date (10-19-23) when the 10Y hit 5.0% intraday. The sub-4% yields on the 10Y UST (3.63%) and 30Y (3.94%) UST in Sept 2024 tend not to be a discussion point from Team Trump.

We update the long-term 2Y to 10Y slope history after this past week’s bear flattener as the 2Y UST pushed higher after the Jackson Hole speech. The current +39 bps is less than half the long-term median.

This chart shortens up the timeline for the 2Y to 10Y slope to a start date of early Jan 2021 with ZIRP. The stretch from ZIRP and across the ensuing inflation and tightening cycle into an easing made for a very wild rise. The slope peak of +159 bps in March 2021 gave way to an inversion of -107 bps (3-8-23) and -108 bps (7-3-23).

Flattening and inversion cycles have a rough history for the ensuing economic trends. The ZIRP years were somewhat of an anomaly after a bank crisis and later a pandemic.

With FOMC policy uncertain but odds leaning toward FOMC tightening, the question around the long end looms large for refinancing costs and the housing markets. Financing costs in areas such as autos and housing do not get captured in CPI, but that debt service effect undermines affordability.

Some UST curve histories:

Business Cycles: The Recession Dating Game 10-10-22

UST Curve History: Credit Cycle Peaks 10-12-22

Bear Flattener: Today vs. 1994 and Aftermath 10-18-22

Fed Funds, CPI, and the Stairway to Where? 10-20-22

Greenspan’s First Cyclical Ride: 1987-1992 10-24-22

UST Curves: Slope Matters 10-25-22

Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22

Wild Transition Year: The Chaos of 2007 11-01-22

UST Slope Update: Some New Inversion Highs 12-8-22

Yield Curve Lookbacks: UST Shifts at Cyclical Turns 10-16-23

UST Moves 1978-1982: The Inflation and Stagflation Years 10-18-23

UST Moves: 1988-1989 Credit Cycle Swoon 10-20-23

UST Moves: The 1990-1991 Risk Factor Pig Pile 10-24-23

PCE July 2026: Mixed Consumption, Stubborn Inflation

Glenn Reynolds, CFA — Wed, 26 Aug 2026 22:28:39 GMT

These babies are all tariff free!

PCE inflation metrics remain stubborn and well above target with +3.7% YoY headline PCE and 3.3% core. Both were flat to last month in YoY metrics, but both were higher MoM vs. June. Thet signals no relief yet at the high-level metrics.
Among interesting YoY comps in critical lines, we see +15.3% on “energy goods and services” (down from +15.8% in June and +24.1% in May), “durable goods” at +3.4% (up from +2.9% in June), “nondurable goods” at +3.9% (down from 4.1% in June and +5.5% in May). Services inflation was flat sequentially from June at +3.7%.
With current dollar and real DPI (disposable personal income) running ahead of consumption, the demand side of the consumer remains steady and the savings rate ticked higher this month from 2.6% to 3.0%.
Financing costs and monthly payment pressures do not show up in the inflation numbers, but tariffs are part of the equation to the extent the tariff (a de facto border tax) flows into the cost of the product and gets passed through in price. The affordability question is easier to answer with any one-time price move. The recurring inflation theories are separate. Products get pricier, margins get squeezed, or some offset unfolds (cost reduction, etc.).

Note: In this commentary we took out the section where we replay the COVID and stimulus history. It eats up some pages and does not change much. Anyone interested in framing the reality of the DPI and PCE numbers back then (in contrast to what the political ax grinders and revisionists call history, please check out one of the old links.)

The above chart frames the timeline for “Effective Fed Funds minus Core PCE.” For this latest July measure, we see the differential at +0.3% vs. the long-term median of 1.4%. The current differential is not much of an inflation deterrent. A slight uptick in inflation with an easing demanded by Trump would take the market back to negative real fed funds.

If one sees inflation moving higher and demands from the White House to take rates lower, history is tossed and inflation discipline abandoned. Fed funds minus the headline PCE price index could be seen as negative real fed funds in May with PCE above 4%. It is now very close. Core PCE is the favorite comp, and that sits at 3.3% for July. The odds per FedWatch of 1 FOMC hike by the Dec 2026 FOMC meeting is 45.3% late today and odds of 2 hikes stand at 23.7%.

The market awaits Warsh and Jackson Hole this week for more commentary on Friday. Expectations are low for material color on market views.

The above chart updates the long-term time series from 1972 for PCE vs. Core PCE across the decades and cycles. We see the 2.6% headline PCE long-term median in the lower left (well below the current 3.7%) and the 2.6% Core PCE median (vs. current 3.3%).

That peak 4.1% PCE headline in May 2026 was dramatically better than where we came from in July 2022 at 7.1% PCE. The current 3.7% headline is still well above the 2.0% target and has been stubbornly high/higher in 2026.

In the context of 2025-2026, the headline PCE price index was 2.6% in Jan 2025 to start Trump 2.0 before the ensuing moves higher. Iran was the dagger in the lower inflation story and is flowing into a range of PPI, Goods, and Services lines as the effects reverberate. Oil and downstream effects are pervasive across the economy.

This is a replay slide that we use as a reminder on how the 2.0% target inflation rate frames up across more recent cycles.

We include the 1997-2026 timeline above as it offers a useful frame of reference on the PCE target of 2.0% that is routinely discussed by the Fed and in the markets. The shorter timeline from 1997 offers a better visual scale separate from the wild 1970s and 1980s. We will see what comes out of the Warsh working groups in their reviews of Fed policy.

The “1997 to 2026” period presents a rare stretch at or below the 2.0% PCE line and Core PCE median as noted in the chart. It took a lot to go wrong in that time horizon at the systemic level and in terms of macro shocks to cross below or at that 2.0% threshold. The events along the way included tech bubbles bursting in 2000-2001; oil crashes in the late 1990s and in the late 2014 to early 2016 period; and a bank system crisis from 2008 to 2011 (including sovereign stress) to get us there. The COVID pandemic in 2020 was a new one for the modern capital markets.

That gets us back to the debate over what is the correct formal inflation target or the “closet target” somewhere above 2%. There is not likely to be a formal change in the target, but the current backdrop would be missing it regardless. Warsh cites what is “to the left of the decimal” (i.e. “2” or “3”) matters the most. As of May, he was at a “4.” Warsh is leaving himself a lot of room even as he buys time with his working groups. The market has reflected some dissatisfaction with that approach. Even if he does not give guidance, he should at least offer views on the moving parts of the curve given Bessent’s recent activities (see Market Commentary: The Curve 8-24-26).

The above chart frames the long-term differential history between PCE and Core PCE since 1972. The long-term median differential is zero and we are currently at +0.4%. The volatility around that compressed long-term median ties into the energy wildcard with some food distortions also back in the 1970s.

We look at some of the CPI energy and food inflation moves in separate commentaries (see Inflation: The Grocery Price Thing vs. Energy 12-16-24, Inflation Timelines: Cyclical Histories, Key CPI Buckets11-20-23). Food and electricity inflation have been near the top of the affordability political rage-fest in this cycle. Households have been hit hard by energy costs (gasoline and electric bills and indirect impact of freight and operating costs rising in just about everything across food, goods and services).

The power demands of data centers are going to keep that energy and power line item in the headlines and notably as data centers get pushback in the states given power needs/costs and environmental effects. Life will get sticky in AI and the related ecosystem if the electricity topic cannot be addressed. The phrase “infrastructure bottlenecks” is getting tossed around a lot. That will impact AI valuation assumptions and pricing power questions.

After an oil spike and uncertain direction of the Mideast war, we are reminded that the inflation history on the other side of such events is a very bad one. All we need to do is look back at late 1973-1974 (Arab Oil Embargo) and again in 1979 (the original “Iran oil crisis”) on the way into the 1980-1982 double dip. Much of what unfolded after 1979 was closely tied to refined product inventory management. That period crushed many mature manufacturing industries and led to wholesale restructuring alongside wide deregulation. The industrial and services diversity and credit profiles now are much different and much healthier than the Volcker period.

As of today, the news flow around an Iran-Oman deal offers some hope of a rational outcome even if it is not the desired one on free travel in the strait. WTI posted an $81 handle today vs. $87 last Friday. Trump and Bessent are hyping an Economic D-Day to crush Iran, but some allies are pushing back and China rejected it outright. That is likely to fail also.

The above time series plots headline CPI vs. PCE across time. The debates around which inflation metric is the best is something more for the faculty club types, but the above chart drives home how each has behaved across time. The consumer tends to lock in on affordability and purchasing power – as in the “cash in, cash out” impacts on daily life.

“Higher or lower or stable?” is a good place to start regardless. Any investor should be aware of the line-item trends by product groupings. Relative weights are also useful to help guide the strategic reaction to headline and core inflation metrics.

Food and Energy (i.e. not “Core”) are crucial for the consumer even if the monetary ideologues will carry on their views around inflation as narrowly defined in academic terms. The household experience with prices underscores that consumers care about discretionary cash flow and how their take-home pay frames up vs. their household basket. “Derived metrics” used by benchmarks such as CPI often do not match up with their own checkbook experience (owners’ equivalent rent, health insurance CPI, etc.). Such metrics matter less to many. They care about the reality of increasing health insurance premiums or loss of health insurance, as well as the financing costs for their big-ticket purchases (e.g. autos, homes, boats, appliances, etc.).

Financing costs also are not captured in CPI metrics for Goods. The best example is monthly car payments and monthly mortgages, and the UST curve is not helping at this point. Despite that reality, autos are doing well and home prices are only gradually starting to feel downward pressure after a big post-COVID spike.

The above table plots the monthly Disposable Personal Income MoM change numbers vs. the Personal Consumption Expenditure MoM numbers across the years from 2020 through July 2026. It is an easy scan across key time periods for a look at turning points in DPI (e.g. stimulus payments) or PCE. July posted a solid move in DPI vs. Consumption.

The above chart updates the running savings rate reconciliation that comes with the Personal Income and Outlays each month. We saw a fresh low in June of 2.6% while July 2026 just ticked higher to 3.0% in solid income growth. June was the lowest savings rate during the Trump Administration.

The “Why?” of generally declining savings rates can be like a political Rorschach test on “buying on happiness” or “getting slammed on the prices of the household basket, tariffs and financing costs.” That is, some consumers may need to borrow to meet basic bills in the realm of the nondiscretionary.

The savings rate dipped below the 4% line in Oct 2025 and posted 3% handles and edged back above 4% for one month (Jan 2026). That savings rate decline can be a function of various forces, but the inflation trends (health care premiums, gasoline, home heating, and financing costs) and related household cash drain are eating more into real wages and the household bottom line.

2Q26 GDP: 2nd Estimate

Glenn Reynolds, CFA — Wed, 26 Aug 2026 16:52:53 GMT

Jack, plant the tariff beans and GDP grows bigger and faster! 5% for sure!

A 1.5% headline for 2Q26 GDP, down from 2.1% in 1Q26, is not impressive by any stretch. We find reassurance in the stronger Personal Consumption Expenditure (PCE) growth, which was revised higher to 3.4% after an abysmal 1Q26 of 0.5% and 4Q25 of 1.9%. The headline PCE price index for the quarter was revised higher to +5.3% and Core PCE revised up to 3.6%.
For some context, that 3.4% PCE growth is one of two 3% handle PCE Growth quarters in Trump 2.0 (we saw 3.5% in 3Q25). During 2024 and Biden’s last year, PCE growth was 3.9% in 4Q24, 4.0% in 3Q24, and 3.9% in 2Q24. The consumer made a comeback in 2Q26.
The dazzling fixed investment lines remain very impressive at +7.0% as noted in the charts and earlier GDP review. Nonresidential is driving the numbers even with a downward revision in Equipment to +13.6% while Intellectual Property Products was unchanged at +8.8%. Those two dwarf a weak Structures line at -1.8%. Residential was revised down by -0.2% to +1.3%.
The multiplier effects of the AI boom across so many industries (durables and services) are carrying the ball for the economy broadly as highlighted in the 2Q26 Corporate Profits schedule release along with the GDP.
We would argue it takes a string of 4% and 5% headline PCE growth rates to make a “Golden Year” (let alone a “Golden Age”). We have had them in the past, but “this ain’t it.” Clinton and Reagan had more than a few Golden years (see Presidential GDP Dance Off: Clinton vs. Trump 7-27-24, Presidential GDP Dance Off: Reagan vs. Trump 7-27-24).

The above chart updates the GDP line item deltas to reflect the 2^nd estimate for 2Q26. We covered the main events in the bullets on PCE and Fixed Investment, but Government also continues its decline with a -1.0% 2Q26 and a -0.2% adjustment from the advance estimate.

For the usual “distortions” that we highlight each quarter, the “change in private inventories” contribution shaved -0.72% off the headline GDP while the trade deficit delta reduced GDP by another -1.14%.

The GDP timeline above tells a story of slower growth than past cycles but also a mix of line items that highlight the fixed investment boom as well as the dramatic swings in inventory and trade deficit impacts in the interim quarters of 2025 as working capital management was dramatically distorted by tariff phase-ins (see 3Q25 GDP: Morning After Variables to Ponder 12-27-25, 2Q25 GDP: Second Estimate, Updated Distortion Lines 8-28-25, 1Q25 GDP Advance Estimate: Roll Your Own Distortions 4-30-25).

When the smoke cleared on 2025, the annual GDP rate was 2.1% vs. 2.8% in 2024. The 2.1% GDP growth of 2025 was the lowest annual GDP growth since -2.1% in 2020 and +1.8% in 2016. Those are the facts from the BEA.

The challenge in 3Q26 and 4Q26 is to generate a 3.0% handle year despite the tariffs, Iran War fallout, and higher UST rates driven in part by inflation and the pressure of massive deficits and other-worldly UST supply. A 3.0% annual GDP growth rate would not be a Golden Year but would be a well-polished and useful Pewter Year for the next leg of the AI journey. Fewer trade wars and shooting wars would help.

GDP 1Q26 Second Estimate: Shrunk in the Dryer 5-28-26

1Q26 GDP Advance Estimate: Consumer Fade, Investment Boom 4-30-26

4Q25 GDP: More Adverse Revisions in the Golden Year 4-9-26

Some “distortion” stories of past GDP reports:

3Q25 GDP: Morning After Variables to Ponder 12-27-25

2Q25 GDP: Second Estimate, Updated Distortion Lines 8-28-25

2Q25 GDP: First Cut of Another Distorted Quarter 7-30-25

1Q25 GDP Advance Estimate: Roll Your Own Distortions 4-30-25

New Home Sales July 2026

Glenn Reynolds, CFA — Tue, 25 Aug 2026 22:39:46 GMT

A little help please…

Declining volumes ran alongside a slight uptick in inventories and a sequential decline in median home prices to below the $400K line to $393.8K vs. $403.1K in June 2026 and $397.3K in July 2025. That is a rare decline below $400K over the past 4 years.
The 607K SAAR units for new home sales is the 2^nd lowest over the past year with only Jan 2026 lower at 576K.
The critical South region (63% of sales) was down -13.0% MoM and -5.2% YoY while the #2 region in the West (23% of sales) was up by +6.2% MoM and posted +2.2% YoY. The smaller Midwest market (7% of sales) was down sharply by -42.7% MoM and -50.6% YoY. The Northeast (7% of sales) rose by +30.3% MoM and +95.5% YoY.
The homebuilders will now face the added challenge of a wide array of tariffs on material costs to go with high mortgage rates. Whether it be tariffs on supplies from Canada or latitude provided domestic suppliers to raise prices with less Canadian competition (and soon Mexican?), life will stay challenging for builder margins.

The above chart updates the new single family home sales series from 1963, and the current 607K (SAAR) is below the long-term median (636K) despite the more favorable demographics and pent-up demand in this cycle. That gets back into the affordability debate around both price and monthly payment pressures as well as the tight supply of entry level and starter homes. The current UST curve and cost pressures from tariffs will not help there.

The median of 989K in the housing boom/bust cycle from 2001-2009 is 63% higher than current volumes. As we look back to the peak of the housing bubble, we see 1389K in July 2005 at over 2x the July 2026 volume. The COVID panic buying and relocation spree in Aug 2020 saw sales of 1036K in a wild period for new home sales and home starts in a ZIRP market with very low mortgage rates. The market today is facing much higher prices since COVID and 30Y mortgage rates that ended at 6.74% this week (Mortgage News Daily survey).

The above chart plots the share of total home sales (new + existing) that were captured by the “new home” builders. We see the share is now at 13.0% vs. the long-term median of 11.7%. When inventory is scarce, the right home at the right price wins. The challenge overall for new home sales has been mixed for builders by region.

Major homebuilders generally continue to report gross margin compression in 2026 and guide to similar expectations for the year. We see lower prices from the builders even if that comes with the asterisk of product tier and geographic mix.

The market edge for closing a sale favors builders vs. existing home sales (note: existing is still the vast majority of sales volume). Homebuilders have the ability to use incentives and financing support (see Existing Home Sales July 2026: Slow Row 8-11-26), and the homebuilder can tailor packages to close sales.

Given the mortgage rate headwinds undermining volume in the existing home sales market whether “golden handcuffs” or a challenging monthly payment bar to clear for many, the shortage of existing housing inventory at economic all-in costs (price and mortgage rates) has been a recurring drag on that side of the home sales tally.

In new home sales, the gap between the expectations of the seller and buyer is easier to bridge through the incentive programs or the ability to offer variations in home design and specs to make a transaction work.

The new home sales volumes are softer with total new homes down by -6.3% YoY. Prices posted this month dipped back below the $400K line. The 10Y UST is the key benchmark for the direction of 30Y mortgages and that has been moving in the wrong direction YTD despite some relief this week (see Market Commentary: The Curve 8-24-26). The hot headline today is a potential deal between Oman and Iran to get a plan in place on the Strait. We see WTI off by -$2.65 per bbl and the 10Y UST -8 bps lower.

The oil wildcard could potentially ease pressure on the longer end of the curve, but that has been erratic around policy actions, the Iran vs. Trump dynamics, and on-off progress in striking a deal on the Strait of Hormuz. Trump needed to get into the headlines on the Strait today with these other headlines, so he spoke about mines now being cleared and warning Iran not to plant any more.

The CPI, PCE and PPI inflation metrics have been grim despite the inflation easing in June and July showing some mixed progress (we get July PCE inflation this week). May saw headline numbers over 4%, but June-July are seeing comparative energy relief sequentially even if YoY numbers remain ugly for energy (see PPI July: When Lower is Better but Still Bad 8-13-26, CPI July 2026: Slight Breeze, No Chill 8-12-26, June 2026 PCE: Inflation, Income, and Outlays 7-30-26).

The median home price time series tells a simple story that prices had been under modest pressure after a period of record highs and a long stretch over the $400K threshold with a few dips below the $400K line. We had a dip below that threshold in June before being revised this month to $403.1K. July shows another move below $400K at $393.8K.

The move lower can have a lot of contributing factors from mix to region, but a decline is consistent with the major builders reporting. The South’s lower ASP mix can factor in as a lower ASP region, but the “South” by itself has a very wide range as well. The South posted a -13.0% sequential MoM decrease in volumes (-5.2% YoY) in July while the West was higher by +6.2% MoM (+2.2% YoY).

The above chart gives a different visual angle on the median new home sales prices from early 2022. That is a lot of $400K handles with some sub-$400K outliers. The $393.8K in July 2026 is the lowest in the mix.

The price metrics can shift with regional mix as well as home price tiers and related supply issues. The affordability question is still more intertwined with the monthly payment pressures from mortgages. It is about more than price. Those monthly payments are very sensitive to mortgage rates more than home price moves.

The time series above updates the new single family home sales across the cycles since 1973 for the #1 and #2 regions of the South and the West. The 383K for the South is around 63% of the total of all single-family new home sales (SAAR) and marks a sequential decline of -13.0% from June 2026 and is down by -5.2% YoY.

The West at 138K is 23% of the total. For the month, the West was higher by +6.2% sequentially and by +2.2% YoY. The South is running ahead of the long-term median of 314K while the West is materially below the median of 173K.

The timeline for new home sales for the smaller Midwest and much smaller Northeast market is detailed above. The Midwest (7% of July total) was -42.7% sequentially and -50.6% YoY. The Northeast market (7% of total) was +30.3% sequentially and +95.5% YoY. Both of the two smaller regions showed dramatic variance this month.

See also:

Market Commentary Asset Returns 8-23-26