August 2026: Tomoro Market & Portfolio Update

Insights

This Month’s Key Takeaways

U.S. markets were mixed in July, as continued strength in corporate earnings and optimism around AI were offset by rising Treasury yields and a pullback in technology stocks. 

Key takeaways:

• U.S. equities largely consolidated in July. The S&P 500 was approximately flat, while the Nasdaq declined as investors took profits in several large-cap technology and AI-related stocks.
• Corporate earnings remained a key source of support, with generally strong results helping to reinforce confidence in the underlying health of U.S. companies and the broader economy. 
• Treasury yields remained elevated, creating both a headwind for equity valuations and more attractive opportunities across fixed income. 
• Market leadership broadened during the month, highlighting the importance of diversification beyond the largest technology companies and across sectors, styles, and market capitalizations. 

Our perspective: We continue to believe portfolios should remain disciplined and diversified, balancing participation in long term growth opportunities with appropriate exposure to other diversifying assets, including fixed income. We remain focused on long-term objectives rather than reacting to short-term market movements.

What this means for your portfolio?

July’s mixed market environment reinforces why we do not make portfolio decisions based on one index, one sector, or one month of performance. Even when major averages appear flat, leadership can shift meaningfully beneath the surface.

Strong corporate earnings remain an important support for equities, but periodic pullbacks remind us to stay vigilant and avoid allowing any single theme or sector to dominate the portfolio.

Higher Treasury yields continue to create both challenges and opportunities. While elevated rates can pressure equity valuations, they also allow us to earn more meaningful income from fixed income.

Broader market leadership is healthy for diversified portfolios. Exposure across sectors, styles, and market capitalizations can help reduce reliance on the largest technology companies while still allowing participation in long term growth opportunities.

Our approach remains focused on discipline: maintaining appropriate diversification, rebalancing when allocations drift, and keeping portfolios aligned with each client’s long-term objectives rather than reacting to short-term market moves.

Biggest Headlines this month

Client question of the month

With equities supported by earnings and bonds offering higher yields, how should my portfolio be positioned?

• Strong corporate earnings continue to support equities, especially as companies show resilience despite higher interest rates.
• At the same time, elevated Treasury yields mean fixed income is offering more attractive income than investors have been used to for much of the past decade.
• We do not view this as an either/or decision. Instead, the current environment reinforces the importance of balance: maintaining exposure to long term equity growth while also using bonds to generate income and help manage portfolio volatility.
• The right mix depends on each client’s goals, time horizon, income needs, and risk tolerance. For many portfolios, this means staying invested in equities, being selective about areas that have become concentrated, and taking advantage of fixed income opportunities where yields are compelling relative to risk.

Market Overview

Equities

• Market Review: U.S. equities rallied in early August after a mixed July, supported by strong second-quarter earnings, renewed optimism around AI-related growth, and hopes that softer labor data could give the Federal Reserve more flexibility. Earnings remained a key support, with broad-based profit strength across technology, industrials, financials, and other sectors. Rising earnings forecasts and higher bond yields are not necessarily conflicting signals; both reflect a market environment shaped by structural forces, including AI investment, supply constraints, and a higher cost of capital. While we remain constructive on equities over the long term, elevated valuations and concentration in large-cap growth continue to reinforce the need for diversification and disciplined rebalancing.

Fixed Income

• Market Review: Fixed income markets remained highly sensitive to the path of inflation, labor data, and Federal Reserve expectations. Long-term rates remain elevated relative to much of the past decade, reflecting persistent inflation uncertainty, fiscal pressures, and a higher term premium. For portfolios, this continues to create both challenges and opportunities: higher rates can pressure bond prices and equity valuations, but they also allow investors to earn more meaningful income from Treasuries, investment-grade bonds, municipals, and other fixed income instruments.

Alternatives

• Market Review: Alternatives exposures remained relevant as oil, gold, and geopolitical risks influenced market sentiment. Oil prices were volatile as investors weighed Middle East tensions and the possibility of a deal involving Iran and the Strait of Hormuz. Gold moved higher as lower yields and softer payroll data supported demand for perceived defensive assets. For client portfolios, this reinforces the role alternatives can play as complements to traditional equities and bonds, particularly in an environment where inflation, energy supply, and geopolitical risks remain persistent.

Chart of the Month

Here at Tomoro, we remain focused on the fundamentals rather than short-term market swings. While higher interest rates may create periods of volatility, strong corporate earnings and a healthy economic backdrop continue to support long-term investment opportunities. Maintaining a disciplined, diversified approach allows us to navigate changing market conditions while keeping clients focused on their long-term financial goals.

What does this chart mean?

July showed the market’s resilience in the face of sharply rising long-term interest rates. Traditionally, a significant increase in Treasury yields can create headwinds for equities by raising borrowing costs, compressing valuations, and increasing competition from fixed income investments. Yet equities largely shrugged off these concerns. 

This dynamic highlighted the central tension investors grappled with throughout the month. On one hand, strong corporate earnings, continued enthusiasm surrounding artificial intelligence, and a resilient U.S. economy provided meaningful support for equity markets. On the other hand, rising long-term interest rates reflected concerns around persistent fiscal deficits and the possibility that interest rates may remain higher for longer than previously expected. The fact that equities continued to advance despite this backdrop underscores the strength of investor confidence in earnings growth and the durability of the economic expansion. Looking ahead, the interaction between earnings growth and interest rates remains one of an important factor for markets.