In August, risk assets started well, driven by positive earnings reports. But after the first week, markets changed and played more defensively as a result of escalation in the Middle East and hawkish comments made by the new Chair of the Federal Reserve at the annual Jackson Hole summit. Nevertheless, the three main domestic equity indices all registered positive returns: the S&P 500 increased by 2.6%, the Dow Jones Industrial Average rose by 1.3%, and the technology-oriented Nasdaq Composite appreciated by 3.9%. The 10-year U.S. Treasury yield finished the month higher at 4.77%, offsetting the efforts of Treasury Secretary Scott Bessent to reduce the long-term yields through a bond buyback scheme.
Although the news stories at the end of the month focused on the continuing conflict in the Middle East, during the middle of the month the spotlight turned to the newly appointed Federal Reserve Chairman, Kevin Warsh. At the annual Jackson Hole summit, Warsh gave a notably hawkish speech in which he mentioned that consumer spending was healthy, the labor market was stable, corporate investment was strong, and the financial conditions were not seen by him as “restrictive”. He also confirmed that the Personal Consumption Expenditures (PCE) deflator remains the Federal Reserve’s preferred measure of inflation and indicated that he did not believe the most recent inflation figures had dealt with the underlying inflationary pressures. Consequently, the markets started to anticipate a greater chance of interest rate increases in the near term, a move which is generally disliked by equity markets. Stocks with long durations, especially those expected to have strong earnings growth, are particularly sensitive to sudden moves higher in interest rates. In the past, Federal Reserve hikes occur more than once when the Fed decides to raise rates, not just a “one-off” hike.
The Middle East conflict is still one of the key events of 2026. By the end of August, the hostilities had increased, involving exchanges of missiles and the introduction of economic sanctions with the aim of cutting Iran off from the global economy. This escalation has brought in other international powers, including China and Russia, which have clearly opposed the sanctions and stated that they will not comply with them. The uncertainty from this situation is still growing and shows no sign of easing. Should the conflict continue to exert inflationary pressures on the US economy while economic growth slows down over the next twelve months, the chance of entering a period of stagflation will go up. In particular, a number of major economic indicators linked to inflation started to rise before the conflict began, and the most recent developments have further strengthened these trends.
The labor market is steady, with hiring rates staying at five-year lows. There has been some slight improvement in hiring over the most recent months, so it is necessary to keep a close eye on the situation. Such monitoring is important since both the number of people claiming unemployment initially and those claiming continued unemployment have fallen and are now near record lows. Even though the news about employment might seem negative, the actual data indicate that the labor market is resilient. The Federal Reserve is unlikely to change its mind about further rate increases because of its dual obligation to address both inflation and employment. If inflation stays high while employment remains stable, the Fed could carry out further rate hikes. Since there is no forecast of a recession in the near term, the chance of several rate hikes increases, which in turn raises the likelihood of selling pressure resulting from a higher discount rate.
Please see the following updates on existing positions held at the firm:
Williams Companies (Ticker: WMB)— Williams reported robust financial performance for the second quarter of 2026, achieving GAAP net income of $0.68 per diluted share, a 51% increase year-over-year, and Adjusted EBITDA of $1.921 billion, representing a 6% rise. The improved results were attributed to higher service revenues, enhanced gas marketing margins, and increased equity earnings from Blue Racer Midstream and Appalachia Midstream. Williams increased its 2026 Adjusted EBITDA guidance midpoint by $200 million to $8.4 billion, primarily due to the acquisition of Momentum Midstream. This transaction, valued at up to $5.5 billion, expands Williams’ operations in the Haynesville basin to address growing Gulf Coast LNG and power demand through long-term take-or-pay contracts.
Public Service Enterprise Group (Ticker: PEG)— PSEG reported second-quarter 2026 GAAP net income of $0.67 per share, a decrease from $1.17 per share in the prior year. The company maintained its full-year 2026 non-GAAP operating earnings guidance of $4.28 to $4.40 per share and reaffirmed its five-year operating earnings growth target of 6% to 8% through 2030. PSE&G segment earnings rose to $342 million from $332 million, attributed to ongoing investments in energy efficiency, gas system modernization, and transmission infrastructure. PSEG Nuclear generated 7.8 TWh of carbon-free baseload power at a 92.0% capacity factor, including a second consecutive breaker-to-breaker run at Salem Unit 2. Leadership stated that the company’s $24-28 billion five-year capital plan can be funded without issuing new equity or divesting assets.
Central Plains Bancshares (Ticker: CPBI)— The bank continues to trade at a discount to its tangible book value of approximately $21 per share. This valuation gap is central to the thesis advanced by activist investor Stilwell Value, which has acquired a 9.7% stake and advocated for a non-binding Share Repurchase Proposal. The board took steps in this direction by approving the submission of a new program to repurchase up to 10% of the outstanding shares. Additionally, Stilwell has secured board representation, with nominee Frank Younes appointed to CPBI’s board ahead of the 2026 annual meeting. These actions reinforce pressure to close the valuation gap through continued share buybacks. We have encouraged CPBI leadership to work with Stilwell.
Okeanis Eco Tankers (Ticker: ECO)— The tanker company announced strong financial results for the second quarter. Revenue increased to $318.9 million in Q2 2026, compared to $93.9 million in the same period of the previous year. Net profit rose to an earnings per share of $5.90, up from $0.84, respectively, in Q2 2025. Adjusted EBITDA totaled $251.8 million, supported by fleetwide daily time charter equivalent (TCE) rates of $191,700. Very Large Crude Carrier (VLCC) rates averaged $213,600 per day, while Suezmax rates averaged $174,900 per day, reflecting favorable market conditions. The board of directors declared a Q2 2026 dividend of $5.25 per common share, payable on August 21, 2026.
We are very pleased with this month’s performance. Our energy and shipping positions continue to provide a strong hedge to the broader market. As a result, we are generating returns consistent with the broader stock market this year, with much less volatility and risk amid further disruption from trade wars or conflict.
Best regards,
Stash J. Graham