Economic data continued to send conflicting signals in August. Some indicators showed early signs of stabilization, while consumer debt, slower economic growth, employment revisions, and elevated market valuations remained areas of concern.
In the August 2026 Market & Economic Update, Jim Kruzan examines those competing signals and explains why recent market gains have not eliminated the reasons for continued caution.
The Leading Economic Index Has Stopped Falling
One potentially encouraging development is the recent movement in the Leading Economic Index. Although the index remains down, it has leveled off during the last couple of months.
That does not yet indicate a strong economic recovery, but it represents a change from the consistent decline seen previously. Some of that improvement may be connected to recent market performance because market-related measurements are among the components used to calculate the index.
Consumers Continue to Face Pressure
Consumer debt remains one of the more concerning areas of the economy.
Credit-card delinquencies remained close to 13% during the most recently reported quarter. That was a slight improvement from 13.1% in the previous quarter, but the change was partly attributable to banks writing off older delinquent accounts—not necessarily consumers paying down their balances.
This continued pressure on consumers is important because consumer spending represents a significant part of the U.S. economy.
Manufacturing, GDP and Employment Send Conflicting Signals
Manufacturing data varied considerably across the different measurements released during the month.
The national Purchasing Managers’ Index declined, as did the New Orders Index. Regional data also differed, with the Philadelphia Fed Manufacturing Index rising slightly while the Chicago index fell by more than 10 points.
Economic growth has also slowed. Final GDP growth was reported at 2.1% for the first quarter and 1.5% for the second quarter.
Employment data has been particularly difficult to interpret. The ADP report showed 39,000 jobs added, which was below expectations. July’s federal employment report showed a loss of 23,000 jobs compared with expectations for 180,000 new positions, while more than 100,000 previously reported jobs were removed through revisions.
The August report showed 162,000 new jobs. Whether that figure holds or is revised in the coming months will be worth watching.
Market Valuations Remain Elevated
Even as economic growth has slowed, stock-market valuations remain historically high.
The Buffett Indicator—which compares the total value of the U.S. stock market with the size of the economy—was hovering around 240%. A reading above 100% is generally considered overvalued, with higher readings indicating a greater degree of overvaluation.
The Shiller Index was approximately 42.3, approaching its previous high of 44.1 reached in December 1999 before the dot-com bubble.
High valuations do not determine exactly when the market will decline. They do, however, suggest that investors are paying historically high prices relative to underlying economic and corporate fundamentals.
Stocks Advanced While Bonds Struggled
The S&P 500 gained 2.6% in August and finished the month approximately 12% higher for the year.
Bonds continued to create challenges for more conservative portfolios. Aggregate bonds, short-term bonds, intermediate Treasury bonds and longer-term bonds were all negative for the year at the time of the update.
Gold increased, while the dollar initially weakened before beginning to show renewed strength alongside higher interest rates and lower bond valuations.
Market Concentration Continues to Grow
A significant portion of the market’s recent growth and earnings has come from the Magnificent Seven technology companies.
Together, those seven stocks now represent more than one-third of the S&P 500. When the three next-largest companies are included, the top 10 companies account for just under 40% of the index based on market capitalization.
For comparison, the 10 largest companies represented approximately 20% of the index before the dot-com bubble 26 years ago.
The influence of artificial intelligence also extends beyond the Magnificent Seven. Companies including Broadcom, Intel, Advanced Micro Devices, National Semiconductor, Micron Technology and Qualcomm have also benefited from enthusiasm surrounding AI and the demand for computer chips.
Research from J.P. Morgan suggests that nearly 60% of the S&P 500 has some exposure to AI. That creates significant growth potential, but it also means that any slowdown in AI-related spending or earnings growth could affect a substantial portion of the market.
What We’re Watching Next
There are signs that some economic indicators may be stabilizing, but the broader picture remains unsettled.
In the coming months, we will continue watching:
- Whether the Leading Economic Index begins to improve rather than simply leveling off
- Consumer debt and credit-card delinquencies
- Revisions to employment data
- Slowing GDP growth
- Historically elevated market valuations
- The increasing concentration of the S&P 500
- Whether AI-related earnings growth can support current expectations
Market conditions can change quickly, and individual investment decisions should remain connected to long-term goals rather than any single economic report.
If you have questions about how current conditions relate to your financial plan or investment strategy, please contact your Kaydan Wealth Management advisory team.
