Climbing the Wall of Worry
Stocks hit record highs, gold rebounded, and Bitcoin remembered which direction “up” is — all while the world’s most important central banker spent the month hinting that rates may need to go higher. This month, the wall had his name on it.
The month at a glance
All readings end-August 2026| Gauge | Reading | Read-through |
|---|---|---|
| S&P 500 | 7,712 +4% | Record high mid-month, then a polite pause |
| MSCI World | ~5,000 +5% | Diversification wins again; first knock on 5,000’s door |
| Fed policy | Hike odds rising | ~50% for September, 70%+ by December. A year ago we debated cuts |
| US inflation | 3.4% core 2.5% | Cooling, but from an uncomfortable altitude |
| 10-yr Treasury | 4.7% | Savers finally get paid; bondholders wince |
| Brent crude | ~$89/bbl | Sanctions instead of missiles; calmer than summer’s $100+ panic |
| Gold | ~$4,600 +9% | The debasement trade is back; insurance earning its premium |
| Bitcoin | ~$79,000 | Back from the naughty step; ETF outflows have stopped |
| VIX | 14.4 | Suspiciously calm for a market pricing a possible hike |
How did you ride August’s market? If you simply stayed in the saddle, the answer is probably: rather well. An old Wall Street saying goes that bull markets climb a wall of worry — stocks often rise precisely when there is plenty to fret about. August supplied both the climbing and the worrying in generous quantities.
Stocks: new records, then a polite pause
The S&P 500 — America’s benchmark index of 500 large companies — touched an all-time high near 7,817 in mid-August before easing back to close around 7,712, up roughly 4 per cent. Global markets did even better: the MSCI World, a decent proxy for a globally diversified portfolio, rose almost 5 per cent and is now knocking on the door of 5,000 for the first time.
Nvidia and Microsoft recovered a chunk of their summer losses, Micron jumped, and Palantir gained a frankly absurd 49 per cent. SpaceX, fresh from its record-breaking June listing, added another 30. Not everyone was invited to the party, which is the healthy part: this rally is broad but not universal, and that is better than the alternative.
The Fed: a hawk went to Wyoming
Kevin Warsh, who took over from Jerome Powell earlier this year, gave his first speech at Jackson Hole — the annual gathering of central bankers in the Wyoming mountains where big policy signals are traditionally dropped. His message was consistent with everything he has said since taking the job: inflation is not beaten, and the Fed will do what it takes.
After a hotter-than-expected inflation reading late in the month, markets now price roughly a coin flip’s chance of a hike in September, and better than 70 per cent odds of one by December. Remember, a year ago everyone was debating how many cuts were coming.
Inflation: cooling, but from an uncomfortable altitude
US consumer prices rose 3.4 per cent over the year to July, down slightly from 3.5, with core inflation (which strips out food and energy) at 2.5 per cent. The main culprit remains energy, still elevated from the war with Iran: petrol is up around 25 per cent on a year ago, with the US average back above 4 dollars a gallon.
We quote the US figure because it drives the Fed, and the Fed drives global borrowing costs. But this is a worldwide story: Eurozone inflation ticked up to 2.9 per cent, and the ECB — which raised rates in June for the first time in three years — is openly keeping the door ajar for more. Central banks everywhere are singing from the same hawkish hymn sheet, just in different accents.
Bonds, oil and the tax everyone pays
The 10-year US Treasury yield — a useful gauge of how worried investors are about inflation and government borrowing — spent the month near multiyear highs and ended around 4.7 per cent, with the 30-year above 5.2. A reminder for bondholders: when yields rise, existing bond prices fall. The consolation prize is that savers and new-bond buyers are finally being paid properly for their patience.
On oil: Washington rolled out what it called its toughest sanctions ever on Iran, shifting the pressure from military strikes to economic strangulation, while diplomats haggled over reopening the Strait of Hormuz — the narrow waterway carrying about a fifth of the world’s oil. Brent ended the month near 89 dollars a barrel: choppy, but calmer than the 100-plus panic of early summer.
Gold and Bitcoin: insurance and mood
After its brutal June and a quiet July, gold rose about 9 per cent to around 4,600 dollars an ounce, its best level since May. This time the driver was less war and more debt: the US Treasury expanded its bond buyback programme, reviving old worries about governments quietly eroding the value of paper money. Gold remains well below January’s record above 5,600, but its job description has not changed: it is the insurance policy you hope you never need, and this year it has earned its premium.
Bitcoin climbed to its highest since May — still down sharply from the late-2025 record, still moved primarily by liquidity and mood rather than fundamentals, but the record ETF outflows of early summer have stopped. The “number go up” crowd is cautiously clearing its throat again.
And the fear gauge slept through all of it. The VIX ended the month around 14.4 — remarkably calm for a market pricing a possible rate hike. Either investors know something, or they are not paying attention. Mine remains a suspicious calm.
My takeaway for August
Markets delivered new highs against a backdrop of hawkish central bankers, an oil-producing region under sanctions, and a brewing trade spat — Canada announced retaliatory tariffs on 20 billion dollars of US goods, effective early September. That is what walls of worry look like.
September brings a jobs report, fresh inflation data, and a Fed meeting where a hike is genuinely on the table. Stay invested, stay diversified, and keep some dry powder earning that 4-plus per cent while you wait.
Quotes of the month
Time in the market beats timing the market.Investment adage
Gold is money. Everything else is credit.J.P. Morgan, 1912
Long term, there is a strong correlation between process and outcomes.Nicolai Tangen
On the blog this month
The Wit and Wisdom of Peter Lynch
The Magellan legend compounded at 29.2% a year, then gave the whole method away in one 1994 speech. If you cannot explain a stock to a ten-year-old in two minutes, do not own it — and the key organ in investing is the stomach, not the brain.
Read the articleDavid Swensen’s Yale Model, Explained
He took an 80% pay cut to run $1 billion and left it above $31 billion. Why asset allocation drives over 90% of your results, and why his advice for the rest of us is refreshingly humble: go passive, and judge everything in decades.
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If You Can’t Explain It, Don’t Own It
Lynch’s legendary 1994 National Press Club lecture, cut and annotated, with the examples’ second acts added where they change the picture. He is funnier in person than on the page.
Watch on YouTubeHe Turned $1 Billion Into $16 Billion — David Swensen's Yale Model Explained
Swensen explains the complete Yale Model in his own words, with every chart and data point visualised.
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