United States — Weekly Research Report (week ending 2026-08-28)
Headline Market Performance
The US equity market experienced a mixed week ending August 28, 2026, with the broader S&P 500 index declining -1.4% over the week while maintaining a strong 12.9% year-to-date gain. Detailed closing levels for the Dow Jones Industrial Average, Nasdaq Composite, and Russell 2000 are not found in this week’s results, nor are the specific weekly and YTD percentage changes for those indices available in the provided data. The available data focuses on the S&P 500 and its constituent sectors as reported in the Manulife John Hancock Investments Weekly Market Recap.
Key Economic Indicators
Specific releases for US CPI, US GDP, and the US unemployment rate are not found in this week’s results. Similarly, the precise current US Federal Reserve funds rate and the US 10-year Treasury yield are not found in this week’s results.
However, BlackRock Investment Institute commentary from August 10, 2026, provides context on the macroeconomic regime. The commentary notes that markets are pricing in restrictive policy rates of about 3% for several years in the Euro area, and highlights that long-duration bonds are becoming less reliable portfolio diversifiers due to persistent inflation and high debt loads. The report also suggests that inflation is settling above pre-pandemic levels, though economic growth could slow, potentially causing markets to underprice this inflation risk in the near term.
Sector Winners and Losers
Based on the S&P 500 sector performance for the week ending August 22, 2026:
- Healthcare was the top performer, rising 4.3% for the week, contributing to a 13.8% YTD gain.
- Energy also posted strong gains, up 2.9% for the week and 44.0% year-to-date, driven by scarcity and supply concerns.
- Materials gained 2.3% for the week, finishing 18.1% higher for the year.
- Industrials declined -3.4% for the week, though they remain up 16.9% YTD.
- Information Technology fell -3.2% for the week, despite a robust 20.4% YTD performance, likely reflecting profit-taking or rotation after strong prior gains.
- Utilities dropped -3.5% for the week, ending the period with a modest 1.6% YTD gain.
Capital Flows, IPOs, and Policy
- Fixed Income Strategy: BlackRock recommends preferring short- and medium-term government bonds over long bonds for income, citing high rate sensitivity and reduced diversification benefits of long bonds in the current regime.
- Equity Allocation: The firm maintains a tactical Overweight view on United States equities, citing strong corporate earnings fueled by the AI buildout and a favorable macro backdrop that is outpacing higher interest rate expectations.
- Credit Markets: Selectivity is emphasized in credit markets due to tight spreads and uneven fundamentals. Recommendations include favoring credit with clear cash flows, lender protections, and recovery value, specifically higher-rated high yield.
- AI Infrastructure: Investment focus is shifting toward AI bottleneck opportunities, including power, chips, and data centers, with an overweight stance on US equities to capture this demand.
- International Views: Europe and the UK are viewed as Neutral, with Europe favoring financials and infrastructure, while Japan is viewed as Overweight due to strong corporate balance sheets and governance reforms.
Near-Term Outlook and Risks
The near-term outlook is characterized by strong US corporate earnings driven by AI infrastructure spending, which supports equity valuations despite rising interest rate expectations. However, investors face headwinds from tight credit spreads and the potential for inflation to remain stubbornly above pre-pandemic levels, complicating the Federal Reserve’s path.
Top three risks to monitor in the next 1–2 weeks include:
- Inflation Persistence: The risk that persistent inflation and high debt loads will force higher compensation for long-term bond holders, impacting fixed income valuations.
- AI Bottleneck Dynamics: The speed of the AI buildout may create binding bottlenecks in power and chip supply, potentially leading to volatility in related sectors.
- Credit Spread Tightening: The risk that tight credit spreads could widen if corporate issuance increases or if risk appetite shifts, particularly affecting lower-rated credit.