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Markets continued to move higher last week, with most major U.S. indexes posting gains. The S&P 500 gained 0.50%, bringing its year-to-date return to 13.51%, while the Nasdaq rose 0.85% and was up 14.03% for the year. The Dow gained 0.55% for the week and was up 12.58% year to date. Small-cap stocks moved in the opposite direction, with the Russell 2000 declining 1.49% for the week but remaining up 20.65% for the year.
One of the more interesting developments this year has been the difference between value and growth stocks. The Russell 1000 Value Index was up 23.84% year to date, compared with just 4.10% for the Russell 1000 Growth Index. International markets have also participated, with the MSCI EAFE Index up 14.70% and emerging markets up 24.55% year to date. These numbers are a good reminder that leadership can change quickly and diversification remains an important part of long-term investing.
The Economy Remains in Focus
The latest economic data provided investors with a few more pieces of the puzzle. The second estimate for second-quarter GDP remained unchanged at 1.5%, while PCE inflation remained at 3.7% year over year. This week, markets will be paying particular attention to PMI data and the latest employment report. Those reports should provide additional information about the strength of business activity and the labor market as we move into September.
Interest rates remain elevated across the Treasury market as well. The 2-year Treasury yielded 4.34%, the 10-year Treasury was at 4.73%, and the 30-year Treasury stood at 5.22% as of August 28. At the end of 2025, those yields were 3.47%, 4.18%, and 4.84%, respectively. Higher rates continue to create opportunities for income-oriented investors, but they also keep borrowing costs elevated for consumers and businesses.
We can see the impact of those higher rates in areas such as housing. J.P. Morgan's data showed the 30-year fixed mortgage rate at 6.71%, compared with 6.25% at the end of 2025. The prime rate remained at 6.75%, while the Secured Overnight Financing Rate, or SOFR, stood at 3.64%. For households, businesses, and investors alike, the cost of borrowing remains an important part of today's financial environment.
Bonds Are Offering Meaningful Income
The bond market continues to offer income levels that investors haven't always had available in recent years. J.P. Morgan's data showed the U.S. Aggregate Bond Index yielding 4.99%, U.S. corporate bonds yielding 5.48%, and 10-year municipal bonds yielding 3.75%. High-yield bonds stood even higher at 7.59% in the Weekly Data Center. For investors who need portfolio income, particularly those approaching or living in retirement, those numbers deserve attention.
Higher income, however, usually comes with higher risk. That's particularly important in the high-yield bond market, where companies typically have lower credit ratings and therefore must offer investors more income to compensate for additional credit risk. J.P. Morgan notes in its commentary that the high-yield index is currently yielding around 7.3%. That income may be attractive, but investors still need to understand what they're being compensated for before reaching for additional yield.
Looking Under the Hood of High-Yield Bonds
High-yield credit spreads have narrowed significantly and are now sitting around the 4th percentile compared with history. In plain English, investors are receiving relatively little additional compensation for taking credit risk compared with many previous periods. At the same time, the trailing 12-month high-yield default rate has increased to 2.0%, its highest level since January 2024. Those numbers don't necessarily signal a problem throughout the entire high-yield market, but they do reinforce the importance of being selective.
The details behind those defaults provide some important context. There have been 12 payment defaults so far this year, primarily concentrated in the cable, paper, and industrial sectors. J.P. Morgan also notes that much of the year-to-date default activity has come from repeat offenders, pointing more toward company-specific problems than broad weakness across the entire market. The composition of today's high-yield index also includes a smaller percentage of CCC-rated debt than in previous cycles, which could help keep overall default rates below historical norms.
The chart on page one makes the difference between credit-quality levels particularly clear. The current default rate for BB-rated high-yield bonds was 0.0%, while B-rated bonds had a 1.7% default rate. CCC/split-CCC bonds were much higher at 8.6%, compared with an overall high-yield default rate of 2.0%. In other words, much of the stress we're seeing is concentrated toward the lowest-quality portion of the market rather than being evenly distributed across high yield.
There are also reasons to remain constructive about the broader credit market. Corporate earnings have remained strong, helping support the financial health of many companies. J.P. Morgan reports that credit upgrades have now outpaced downgrades for five consecutive months. That's encouraging, but with spreads already historically tight, careful security and manager selection becomes increasingly important.
Commodities Continue to Move
Commodities have also experienced significant movement during 2026. J.P. Morgan's data showed WTI crude oil at $83.61, compared with $57.26 at the end of 2025, while gold stood at $4,563, compared with $4,368 at year-end. Copper was at 14,535, compared with 12,504 at the end of last year. These moves show that some of 2026's strongest market activity isn't limited to stocks and bonds.
Energy's performance is particularly notable when looking at the S&P 500 sectors. The chart on page one shows Energy up approximately 41.2% year to date, followed by Consumer Discretionary at 22.5% and Utilities at 17.7%. Yet Energy declined 2.0% during the most recent week, while Technology gained 1.8%. Short-term market leadership can change quickly, which is one reason we don't believe investment decisions should be based on a single week's performance.
What Does This Mean for Investors?
There are opportunities across several parts of today's market. Stocks have generally performed well, international and value stocks have participated, and higher interest rates have created more meaningful income opportunities in fixed income. At the same time, attractive returns and higher yields shouldn't cause us to forget about the risks we're taking to pursue them. A 7% yield means very little without understanding why the market is willing to pay you 7% in the first place.
This is especially important for investors approaching or living in retirement. The objective isn't necessarily to find the investment offering the highest yield or the market segment that has performed best this year. It's to determine how much income you need, how much risk you're comfortable taking, and how each investment fits into your broader retirement strategy. A portfolio should ultimately be designed around your financial plan rather than around whatever happens to be leading the market today.
At Mission Financial Planners, we believe investments are one component of a much larger financial picture. Income planning, investment management, insurance planning, tax efficiency, and estate planning should work together rather than operate independently. Markets will change, interest rates will move, and today's leaders eventually give way to something else. A coordinated financial plan gives us a framework for making decisions through those changes instead of reacting to every headline.
Data and market commentary are based on J.P. Morgan Asset Management's August 31, 2026 Weekly Market Recap. Past performance does not guarantee future results, and diversification does not guarantee investment returns or eliminate the risk of los