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* FIEND'S SUPERBEAR MARKET REPORT *

* August 31, 2026 *

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* e-mail: fiendbear@fiendbear.com *

* web address: http://www.fiendbear.com *

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Fiend Commentary
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August: Stocks Won, Bonds Called the Bluff

August ended with stocks lower, oil above $90 and Treasury yields pushing back toward their most threatening levels of the year. The Dow lost 374 points Monday, the S&P 500 slipped 0.3% and the Nasdaq edged lower as renewed U.S.-Iran fighting revived inflation concerns. Brent crude settled at $90.49, WTI at $85.76, and the market raised the probability of a September Fed hike to roughly 65%.

The most important move, however, was in bonds. The 10-year yield reached 4.768%, its highest since January 2025. The 30-year closed near 5.25%, only modestly below the 5.327% level reached earlier in August—the actual 19-year high. The Treasury’s announcement of larger long-bond buybacks produced only temporary relief before yields began climbing again.

That is the contradiction heading into September. Kevin Warsh has not raised rates, yet borrowing costs at the long end are already near multi-decade extremes. The Fed keeps threatening action, while the bond market increasingly appears to believe it will remain behind the inflation curve.

A Hike Probability Is Not a Hike

Warsh’s Jackson Hole speech pushed the estimated probability of a September hike from roughly 35% to about 65%. He emphasized that inflation remains too high and that the Fed still has work to do. The market reacted as expected: short-term yields rose, the dollar strengthened temporarily, and metals pulled back.

But the Fed still has not acted.

The year began with Wall Street treating rate cuts as nearly inevitable. August ended with traders debating a hike. That is a dramatic reversal, but it does not necessarily tell us what the Fed will do on September 16. It tells us what investors believe before Friday’s employment report.

Economists expect August payrolls to rise by only about 58,000 after July’s surprise loss of 23,000 jobs, with unemployment holding near 4.1%. The report will be released Friday morning.

A weak report could knock the September probability down almost as quickly as Jackson Hole raised it. Another negative payroll number, a rise in unemployment or substantial downward revisions would give Warsh an obvious reason to remain on hold. Wall Street would argue that the Fed should not tighten into a weakening labor market, particularly only weeks before the midterms.

That is where **WACO—Warsh Always Chickens Out—**will face its first real test.

If employment remains reasonably strong and inflation stays well above 2%, Warsh’s own argument points toward a hike. If he still refuses to act, the market may conclude that Jackson Hole was another exercise in obtaining tighter financial conditions through words.

If employment is weak, he can hold rates without technically abandoning the hawkish position. He can say the inflation fight continues but that policy must balance both sides of the Fed mandate. September then disappears, October becomes the next possibility, and December becomes the final chance for a symbolic quarter-point increase.

The goalposts can continue moving until 2026 ends with no increase at all.

August Was a Winner—On the Scoreboard

Despite Monday’s losses, August was another positive month for the major averages. The Dow gained approximately 1.3%, the S&P 500 rose 2.6% and the Nasdaq led with a 3.9% advance. The S&P and Nasdaq recorded their strongest August performances since 2021.

The gains were real, but the month was less uniform than those percentages suggest. Technology and AI stocks swung violently between euphoria and disappointment. Nvidia, Microsoft, Palantir and Salesforce produced enormous rallies at different points, while SpaceX continued deflating from its IPO mania and several semiconductor names suffered deep corrections before recovering.

Even the Dow’s gain was unusually concentrated. Salesforce reportedly contributed more than 450 points to a monthly Dow increase of roughly 720 points. More than half the advance came from one stock.

That is not necessarily bearish. Large companies carry large index weights, and successful earnings should be rewarded. But it shows how much of the market’s apparent health still depends on a small number of favored companies producing extraordinary results.

August finished with the Nasdaq near record territory, but not with every stock participating. Monday’s session provided another warning: declining stocks outnumbered advancers by almost two to one on the New York Stock Exchange, and Nasdaq recorded substantially more new lows than new highs.

The scoreboard says bull market.

The internal market remains much more selective.

Metals and Miners Won August

The clearest August winners were gold, silver and mining shares.

Gold gained approximately 9.7% for the month, its strongest performance since January. Silver rose about 15%, recovering sharply after two months of heavy losses.

The Philadelphia Gold and Silver Index did considerably better. The XAU rose from 307.90 on July 31 to 407.64 on August 31—a gain of approximately 32.4%.

Mining stocks naturally amplify moves in the underlying metals. Their production costs do not rise dollar for dollar with gold or silver, so a sufficiently large increase in metal prices can produce an even larger percentage gain in expected profit margins. The reverse is also true, which explains why miners were devastated during the earlier metals decline.

The size of August’s rebound suggests more than ordinary bargain hunting. Gold, silver and mining stocks began moving when investors concluded that Warsh’s threatened tightening cycle might never become more than one token hike—if even that.

Friday’s hawkish speech knocked the metals down, and Monday brought another decline as hike expectations rose. Yet those losses barely dented the monthly advance. The metals market appears to be separating one possible quarter-point increase from a genuine inflation-fighting campaign.

A single hike would not eliminate $40 trillion of federal debt.

It would not reverse renewed M2 growth.

It would not restore the Strategic Petroleum Reserve.

It would not end the war or return oil to its January price.

It would not create fiscal discipline.

Gold and silver may be betting that even if Warsh raises rates once, the next major policy cycle will still involve accommodation when the economy or financial markets weaken.

The Long Bond Does Not Believe in a Token Gesture

The bond market presents the same argument more aggressively.

A quarter-point increase in September would affect the two-year Treasury and other short maturities most directly. It might strengthen the dollar and temporarily pressure metals. It would do much less to address the forces behind a 30-year yield near 5.25%.

Long-term investors must consider persistent inflation, enormous Treasury issuance, growing interest expense and whether future recessions will produce another major expansion of the Fed’s balance sheet. They are not merely guessing the outcome of one meeting.

That is why the 30-year yield remained near its 19-year extreme even while September probabilities moved from 80% to 30%, then back above 60%. The long bond has been far less impressed by the FedWatch mood swings.

Treasury Secretary Scott Bessent insists the bond market remains healthy and says the government’s larger buybacks are intended to improve liquidity rather than manipulate yields. That distinction may be correct, but the market has already demonstrated that $4 billion operations do not resolve the underlying imbalance between debt supply and investor demand.

The 10-year approaching 5% would be the next major threshold. It ended Monday near 4.76%, leaving less than a quarter-point before reaching that level.

At 5%, the consequences would become difficult for stocks to ignore. Mortgage rates would likely move higher, corporate refinancing would become more expensive, private-credit stress would increase and the relative appeal of highly valued equities would weaken. A Treasury security yielding 5% presents serious competition to stocks whose valuations already assume exceptional future growth.

The Fed may avoid tightening in September.

The long bond can tighten financial conditions without asking permission.

Oil Refuses to Stay in the Background

The latest increase in yields also followed another escalation in the Middle East. The United States struck Iranian positions near the Strait of Hormuz, Iran retaliated against U.S. bases in Jordan, and Brent returned above $90.

The war has repeatedly moved between threats, temporary pauses and announcements that another settlement is near. Markets have learned to trade that pattern rather than expect a final resolution. Oil drops whenever negotiations restart and rises again when the incompatible positions become clear.

Iran wants continuing leverage over the Strait.

The United States wants unrestricted navigation.

Those objectives remain difficult to reconcile.

Oil at $85–$90 is well below the panic highs reached earlier in the war, but it is high enough to keep pressure on gasoline, freight, food and inflation expectations. It also arrives after global emergency reserves have been heavily drawn down.

This leaves Trump and Warsh sharing the same problem. Another oil shock before the midterms would damage consumer confidence and raise headline inflation. A rate hike intended to contain that inflation could add pressure to employment, housing and stocks.

The politically convenient outcome is another ceasefire, lower oil and no Fed hike.

The market has been betting on convenient outcomes all year.

September Begins With the Same Question

August was a winner for stocks, a spectacular month for metals and miners, and another difficult month for anyone hoping long-term bond yields would return to normal.

The Dow and S&P remained near records.

The Nasdaq finished with the strongest monthly gain.

Gold and silver recovered from major support.

The XAU surged more than 32%.

Oil returned above $90.

The 30-year stayed near its highest yield since 2007.

That is not one coherent market narrative. It is a collection of assets pricing different versions of the same policy problem.

Stocks believe the Fed can remain patient without causing serious inflation damage.

Metals believe the Fed will eventually choose accommodation.

Long bonds believe patience and accommodation require higher yields.

Friday’s employment report may determine which view dominates the first half of September.

A strong number would leave Warsh little excuse not to act after his Jackson Hole speech.

A weak number would send hike expectations lower and give WACO another appearance.

Either way, rate cuts are no longer the immediate debate they were when 2026 began. The current argument is whether the Fed delivers one quarter-point hike or finds another reason to wait.

The bond market appears to believe that waiting is the more likely long-term policy.

At 5.25% on the 30-year, it is charging Washington accordingly.

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