Stocks Rally but End a Volatile Week Lower | The Close 8/21/2026

Market Recap: A Wobbly End to a Volatile Week [0:00]

• The market closed on a mixed note, with equities showing gains for the day but ending the week in negative territory.
• This follows a period of significant volatility, particularly in the Treasury market, with the 30-year yield nearing levels that had previously spooked investors.
• The "debasement trade" gained momentum, characterized by rising gold and Bitcoin prices and a weakening dollar.

"A jittery low volume week comes to a wobbly lopsided end."

Market Performance and Outlook [0:31]

• The S&P 500 staged a relief rally amid strong economic data, though it was on track to end its three-week winning streak.
• The Nasdaq also saw gains, breaking a five-day losing streak, as markets awaited Nvidia's earnings.
• More than half of S&P 500 stocks were set to end the week in the red, with a significant portion down by 3% or more.

"But there's still a lot of questions out there and two consequential events staring us down next week."

Key Events on the Horizon [1:10]

• Two major events are poised to influence market direction next week: Nvidia's earnings report and the Federal Reserve's Jackson Hole meeting.
• Nvidia's performance is crucial for the AI trade, while the Jackson Hole symposium could provide insights into the Fed's future monetary policy.

"NVIDIA's earnings as Sally just mentioned in the Fed's Jackson Hole meeting."

Treasury Market Turmoil and Yield Spikes [1:26]

• The week was significantly shaped by large swings in Treasury yields, with the 30-year yield hitting its highest level since 2007.
• Treasury Secretary Scott Besson's actions to cap long-term government yields were a focal point of discussion.

"The week of course that was might best be remembered for the big swings in Treasury sparked by a big swing by Scott Besson trying to cap those long term government yields that poked past 5.3 percent on Monday the highest since 07."

Fiscal Concerns and the Debasement Trade [2:03]

• Market participants are discussing the tools Besson might employ and whether the Fed would support his actions.
• The effectiveness of capping yields is questioned, with emphasis placed on the need to address the budget and fiscal problems.
• This fiscal issue is central to market skepticism and the renewed discussion of the "debasement trade," which shuns currencies vulnerable to inflationary and fiscal excess.

"So it's really tactical rather than strategic. And you really at the end of the day you have to fundamentally attack the budget problem the fiscal problem."

Asset Performance Amidst Market Tension [3:00]

• The dollar weakened against all major currencies this week.
• Conversely, spot gold rallied for a third consecutive week, and Bitcoin saw its strongest five-day gain since March 2023.

"That is how we close out the week. And that will be the setup for next week as we head into that Jackson Hole meeting."

Expert Analysis: The Debasement Trade as a Theme [3:24]

• Alexio DeLongas of ProShares notes that the "debasement trade" is the theme of the week, reflecting market tension.
• He points to a disconnect between strong earnings, particularly in tech, and the lack of attention to other asset classes.
• The combination of rising bond yields, gold up, and dollar down is seen as likely to continue.

"The debasement trade this week is is the theme of the week. This is a week of market tension between."

Asset Allocation Strategy [4:04]

• DeLongas recommends underweighting fixed income and overweighting equities, citing strong earnings growth.
• He suggests that while credit spreads are low, the current market dynamics justify allocating away from fixed income and into alternatives like gold.

"But explain the overweight equities part of that underway fixed income. I understand why overweight equities earnings are running at both on a trailing and forward basis at 35 percent year year."

Equities as an Inflation Hedge [4:45]

• Despite rising bond yields, earnings growth is seen as sufficient to justify buying dips in equities.
• Equities are viewed as an inflation hedge that, in the medium to long term, can maintain profit margins due to companies' pricing power.

"But then equities are an inflation hedge. Equities eventually prove on a medium to long term basis to actually have those inflation properties because most companies have the pricing power and to maintain those those profit margins."

Productivity and Real Yields [5:20]

• The stability of break-even inflation is noted, while real Treasury yields are at 3% on the 30-year, which typically signals a high cost of capital.
• However, strong earnings growth suggests this might reflect high productivity rather than a loss of confidence.

"Real yields real treasury yields are now on the 30 year is at 3 percent. Now that is typically a negative because it flags a very high cost of capital or is it actually telling us the productivity is really strong."

Shifting Investor Preferences [5:50]

• There's been a fade in performance for some chip stocks and high-valuation names, with the equal-weighted S&P 500 and Russell outperforming.
• This suggests a potential shift away from mega-cap tech towards quality stocks with high profit margins.

"Is that a sign of where investors heads are at heading into the next couple of earnings seasons and whether that is at the expense of the big big cap names."

International Market Performance [6:30]

• International markets (developed and emerging) have outperformed U.S. equities for two consecutive years, despite the AI trade.
• Dollar depreciation is expected to provide tailwinds for international equity markets, suggesting the dominance of U.S. equities may be nearing its end.

"One is we are almost unnoticed. We have had the second consecutive year of international markets both developed and emerging outperformed U.S. equities despite the phenomenal AI trade so to speak."

Fed Policy and Jackson Hole Expectations [7:10]

• The upcoming Jackson Hole meeting is a key focus, with markets anticipating Fed Chair Kevin Warsh's speech.
• There's a desire for more direct communication and clarity on the Fed's decision-making process and commitment to bringing down inflation.
• Concerns exist about the impact of rising energy prices on upcoming PCE data and its implications for Fed policy.

"I think what we need to hear from Kevin Warsh is one Fed independence to they are committed to bringing inflation down. And three we do need to know something about their decision rule."

AI's Deflationary vs. Inflationary Impact [8:30]

• Kevin Warsh's view on AI as a deflationary force is contrasted with the inflationary pressures from infrastructure investment.
• The timing of AI's cost (investment) versus its benefits (productivity) presents a challenge.
• Increased productivity growth could raise the economy's non-inflationary speed limit, potentially making current Fed funds rates too low.

"I think it's a hard one. We've heard him talk about productivity growth. But we know that productivity growth raises the interest rate the non inflationary the speed limit of the economy."

Fed Committee Dynamics and Dissent [9:30]

• The Federal Reserve operates as a committee, and decisions require buy-in from colleagues.
• Recent meetings have shown a notable level of dissent, indicating potential challenges in achieving consensus.

"And that's already been the challenge for Kevin Warsh is that you know he's got people on the committee that have pushed really hard to dissent against him at his second meeting three dissents. That's a lot of dissents."

Bitcoin and Crypto Rally [10:15]

• Bitcoin is set for its third consecutive week of gains, lifting other crypto-related stocks like Coinbase and MicroStrategy.
• The rally is attributed to factors like M2 money supply and the Fed's potential bond buying.

"I do think it's sort of M2 money supply. I think sort of the second the Fed said that they're going to start buying back you know treasuries. I think that's what sort of triggered the whole thing."

Diversification in Crypto Investments [11:00]

• While pure-play crypto companies are seeing gains, diversified companies like Robinhood, with less than 20% of revenue tied to crypto, are seen as a safer bet.
• Robinhood's diversification into other markets and services provides a hedge against crypto volatility.

"But I would say that Robin Hood is so well diversified here. Right. It's rallying today. And there's still upside to to my price target."

Geopolitical Tensions and Oil Markets [11:45]

• U.S.-Iran tensions and potential economic sanctions are a key focus for oil markets.
• Treasury Secretary Scott Besson's upcoming speech on sanctions is anticipated.

"We're going to drill down with Dan Stroven co-head of global commodities research over at Goldman Sachs."

Commodity Market Dynamics [12:15]

• The impact of potential sanctions on Iran's oil exports is debated, as current export levels are already constrained.
• Global refinery runs are down significantly year-over-year, leading to high product margins and diesel prices exceeding crude oil prices.

"The market reaction was modest oil prices did that up somewhat somewhat higher. But I think as long as the Iranian blockades of Iranian ports and Iranian oil stays stays in place the impact of further sanctions because the key driver of Iranian oil export of Iranian export revenues oil is already not getting out of the country."

Gold as a Safe Haven [13:30]

• Gold is seen as an increasingly valuable safe-haven asset, with compelling reasons to own it, including central bank buying and potential ETF investor demand.
• Goldman Sachs forecasts gold prices to rise to $4,900 by year-end, with upside risks.

"We think there are three very compelling reasons to own gold which has been our preferred long commodity recommendation for years now."

Central Bank Gold Demand [14:15]

• Central bank buying of gold is structurally higher and accelerating, driven by a desire to diversify reserves and reduce geopolitical and sanctioned risk.
• The freezing of Russia's central bank reserves in 2022 has significantly impacted central banks' risk management strategies.

"So we do see this increase in central bank buying a structure."

Retail Investor Inflows into Gold ETFs [14:45]

• Retail investors are buying gold primarily through ETFs.
• Recent inflows into gold ETFs have picked up as softer U.S. inflation and jobs data have reduced market pricing for Fed rate hikes.

"We have seen a pickup in retail investor ETF inflows as softer U.S. inflation and jobs data has reduced market pricing."

Citadel's Strategic Trade [15:30]

• Citadel, led by Ken Griffin, offloaded over 80% of the risk associated with assets acquired from the embattled hedge fund Situational Awareness.
• This strategic move generated significant gains for Citadel, boosting its year-to-date returns.

"The fund was up about 6 percent like 5.7 percent through till June for the year. In the month of July it made an additional 6 percent in gains."

Bidding War for Assets [16:00]

• There was a bidding war for Situational Awareness's assets, with Citadel ultimately winning the stock book.
• Other firms like Jane Street and Millennium were also interested, while venture capital firms bid for the private portfolio.

"So there was a bidding war basically to get some of situational awareness as assets. And Citadel ultimately won that war buying a chunk of the stock book up at a 10 percent discount."

Nvidia's Dominance and Competition [17:00]

• Nvidia is the current leader in AI chips, but its dominance relies on cutting-edge technology manufactured by TSMC.
• The lucrative AI market is attracting competition from other chipmakers like Intel and AMD, as well as hyperscalers developing proprietary chips.

"But I think this is and but it's so lucrative. This is why you see other companies really competing for a bigger share in this market."

AI's Impact on Power Grids [17:30]

• The build-out of AI data centers is colliding with the capacity of existing power grids.
• Solutions involve increasing the energy efficiency of computing chips and diversifying energy sources.

"So one aspect is for researchers and the industry to work together more closely to advance innovations that will dramatically increase the energy efficiency of the computing chips."

Transistor Technology and Manufacturing Costs [18:15]

• Advancements in transistor design continue, but cost economics remain a challenge for leading-edge manufacturing.
• The high cost of building new semiconductor foundries is driving innovation to lower manufacturing costs.

"However the challenge is in the cost economics. So it will take a while for the lead the leading edge manufacturing technology to become as cost efficient as the the fin fat based technology."

Government Policies and Chip Competition [19:00]

• Government policies, including export controls and tariffs, aim to balance technological advancement with economic and national security interests.
• A delicate balance is needed to support innovation without hindering companies' profitability and ability to invest.

"But in general it's a fine balance to support advances in technology which are supported by growing the market."

Talent Pipeline for the Semiconductor Industry [19:45]

• There is a critical shortage of technically skilled talent in the semiconductor industry, exceeding 100,000 jobs annually.
• Government initiatives, like the Chips and Science Act, are funding educational networks to address this talent gap.

"We need more technically skilled talent. That's anywhere from tech technicians, technologists, engineers, researchers. We need all of this talent today in the semiconductor industry."

Logistics and AI's Role [20:30]

• AI platforms are helping to digitize and manage supply chain data, which often exists offline.
• The AI build-out faces bottlenecks, with the constraint shifting from chips to power availability.

"Most of the supply chain data as you said lives offline. This is dark data that companies really don't have access to."

Power Constraints for AI Growth [21:00]

• Significant investment is needed to bring massive amounts of power online to support AI demand.
• The chip shortage is subsiding, but a power shortage is emerging as the next major constraint.

"One of the largest I think since the railroad close to five trillion dollars two and a half to three percent annualized U.S. GDP. It's a major major investment."

Easing Chip Crunch and Shifting Constraints [21:45]

• While chip demand remains strong, the constraint is moving from chip manufacturing to power supply for data centers.
• New entrants and capital are emerging due to the high demand, but power availability is becoming the critical bottleneck.

"And as these chips and these AI data centers come online which we're starting to see now and we'll see over the next 12 to 18 months that moves the constraint to power of how do you actually power these data centers that are now coming online."

AI Sentiment and Creative Messaging [22:30]

• A viral commercial by Liquid Death humorously addresses public backlash against AI data centers, highlighting concerns about water usage.
• The ad aims to make light of the topic, emphasizing that true human creativity cannot be replaced by AI.

"It's just this is a topic that's been out in the world and discussed you know ad nauseam. And we just thought this would be a fun way to kind of just sort of make fun of it."

Sports Valuations and Player Compensation [23:30]

• Sports team valuations have surged, with record-breaking sales driven by scarcity, profitability, and ancillary revenue streams.
• The increasing involvement of private equity and institutional capital is changing the complexion of team ownership.

"When I began back in 1976 two teams Seattle and Tampa Bay came in the NFL. Their purchase price was 16 and a half million dollars."

Athlete's Share in Franchise Value [24:30]

• A debate is emerging on whether players should share in the appreciation of franchise valuations, beyond revenue splits.
• Players' associations may push for a piece of equity appreciation in future labor negotiations.

"Shouldn't we also share in some of the equity appreciation. So this now becomes I mean so the next big labor fight you think this may be will be about negotiating negotiating you know team equity league wide revenue participation or compensation linked to these franchise values."

NIL's Impact on College Sports [25:30]

• Name, Image, and Likeness (NIL) deals have dramatically altered college sports, turning student-athletes into free agents.
• This has led to unintended consequences, with players receiving substantial compensation before entering professional leagues.

"N.I.L. has changed everything about college sports. It's turned 17 year olds into free agents who then have different schools bid off against each other to see which deal they'll take."

Mike Tyson's Health and Business Ventures [26:30]

• Mike Tyson is venturing into healthy food options with Sugar Factory, aiming to "make America healthy again."
• He emphasizes the importance of proper nutrition and taking care of oneself, aligning with health initiatives.

"So you're working with the health and human services secretary. Yes. Yes. Oh OK. So Bobby Kennedy. OK. So what are you doing."

Upcoming Economic Data and Events [27:30]

• Key economic data releases include consumer confidence, new home sales, and PCE data.
• The Jackson Hole Symposium and Nvidia's earnings report are major events for the upcoming week.

"Wednesday. That's going to be the big day. We're going to get results out of Nvidia after the bell."