Smart insight and clear visuals that matter – what we’re watching now and how intention and conviction shape our portfolios.
When yields climb toward the critical 5.0% range, corporate borrowing costs escalate, while we observe that government bonds become an increasingly attractive alternative to riskier stocks. Driven by inflation concerns and geopolitical energy shocks, recent upward pressure on bond yields is placing equity valuations—which have hovered near historic highs—in a precarious position. Should yields breach these multi-year peaks, the stock market will likely face significant headwinds as investors reallocate capital away from equities and toward safer, higher-yielding fixed-income assets.
John Hancock points out S&P 500 Q2 earnings are more than halfway complete with numbers continually beating expectations. Earnings growth is tracking at 47% Y/Y. The results are showing further sector broadening with every sector showing double-digit earnings growth except for consumer staples. (Manulife Investments, July 2026)
The initial growth estimates for the year appeared elevated at the time, but earnings have blown past expectations, with nearly an 86% beat rate. (Manulife Investments, July 2026)
At the beginning of the quarter, estimated earnings growth was 18%; today, the states blended at 47%. (Manulife Investments, July 2026)
In what Jefferies called “A Shocking Development” datacenters are now on hold in business-friendly Texas. This week Texas Governor Abbott brought forward a quasi-moratorium in the form of a 40-60 day audit. The directive forces data centers to verify power demand, water usage, tax incentives, and community impact before receiving approval to connect. The potential delays raise concern among datacenter developers and investors, also leaving less margin for error. The chart below from Tortoise Capital (Annual Outlook) shows how quickly datacenters have consumed available power capacity, a trend that appears to have prompted Abbott’s shift in approach. However, the new review process may slow the pace of datacenter development and related infrastructure buildout, at least in the near term.
The AI trade is seeing increased attention toward off-balance-sheet financing arrangements used to fund infrastructure and equipment. Nasdaq companies have generally seen cash balances decline as spending on AI infrastructure and other capital-intensive investments has increased. At the same time, rising capital expenditures have reduced free cash flow for many firms, while wider bond spreads have increased borrowing costs in debt markets. This appears to be much more creative and thus much more interesting, as other sources of financing are squeezed. See the Financial Times graphic below which places Google, Broadcom, Anthropic, Apollo and Blackstone into one financing system where borrowing and lease payments now fund key equipment. (Financial Times, August 2026)
(Source: Financial Times)
Rare coordination in the Yen
Japan has been struggling with a weak currency; up at around ¥160, the Japanese Yen recently hit 40-year lows versus the US Dollar. Combined with rising global energy costs, the slump in the Yen made essential imports like oil far more expensive and fueled domestic inflation. While Japan has been tackling the problem on its own by selling dollars to buy up yen, these solo attempts have had limited success. The game seemingly changed last week when the US Treasury unexpectedly stepped in to conduct a joint currency purchase with Tokyo—the first coordinated effort to boost the yen in nearly 30 years—triggering a sharp rebound in Japan's currency.
What makes Washington's intervention so unusual is that the Federal Reserve Bank of New York actually sold euros, rather than dollars, to buy yen. Many analysts believe the US took this rare step primarily to protect its own economy. If Japan had been left to fight the currency collapse alone, it would have needed to dump massive amounts of US Treasury bonds to raise cash. That sudden wave of bond selling would have pushed US interest rates and borrowing costs higher. By stepping in directly, the US stabilized a key financial ally while safeguarding American bond markets from collateral damage. (Financial Times, August 3, 2026)
Tues, 8/11 @ 10:00 am: Existing Home Sales
@ 11:00 am: Federal Reserve Bank of New York Q2 Household Debt and Credit Report
Wed, 8/12 @ 8:30 am: CPI, Core CPI, M/M% and Y/Y%
@ 2:00 pm: Monthly Treasury Balance
Thur, 8/13 @ 8:30 am: Weekly Jobless Claims
@ 8:30 am: PPI, Ex-Food & Energy PPI, M/M%
Fri, 8/14 @ 8:30 am: Retail Sales
@ 10:00 am: Manufacturing & Trade: Inventories
Mary Ahn
Investment Research and Portfolio Strategy Manager
Cal Jones, CFA
Managing Director of Fixed Income
Eric Speron, CFA
Managing Director of Equities
Alton Tjahyono, CFA
Sr. Investment Strategist