Khan Capitals | August 2026
Key Takeaways
- Records with an asterisk: the S&P 500 topped 7,800 for the first time and the Russell 2000 logged its 27th record close of 2026, while the market sold record results from Applied Materials and Cisco.
- The demand data cracked: July retail sales fell 0.6 per cent, the largest drop in over a year, a week after the first payrolls contraction in 53 months.
- The Iran blockade went open-ended: Washington said it can sustain the naval blockade indefinitely, drones hit two ADNOC tankers, and Iranian exports sit at zero with Brent still under $88.
- September hike odds stayed halved: tame CPI on Wednesday and a flat monthly PPI on Thursday entrenched the repricing, even with producer prices up 4.7 per cent on the year.
The Week in One Paragraph
This was the week the melt-up broadened and the economy narrowed. Equity records spread from the megacaps to the small-cap index that spent two years left behind, powered by a rate path that keeps getting friendlier; the reason the rate path is friendlier is that jobs, inflation and now consumer spending are all cooling at once. Around the edges, a war in the Gulf stopped pretending to be temporary, and the market barely charged for it.
1. Inflation Cooperated, Twice
Wednesday’s CPI matched expectations and Thursday’s producer prices were flat on the month, the pair that keeps the September hike case in retreat. The annual PPI rate of 4.7 per cent is the hawks’ best remaining exhibit, but the eight-day collapse in hike odds we covered in the Fed’s eight-day reversal survived the week intact. The S&P 500 set a record above 7,800 on Thursday on the back of it.
2. The Blockade Lost Its End Date
Defence Secretary Hegseth said the US can maintain its blockade of Iranian ports indefinitely; hours earlier, drones struck two ADNOC tankers in the Strait of Hormuz, the fifteenth and sixteenth attacks on Abu Dhabi’s fleet since February. No tanker has loaded at Kharg Island for a week, and Treasury Secretary Bessent queued new sanctions behind a 17 August deadline. Brent finished at $87.19, calm the market may yet have to defend, as we analyse in the blockade that stopped being temporary.
3. Small Caps Made Records While AI Beats Got Sold
The Russell 2000 closed Friday at a record 3,068, up 22.7 per cent for the year and ahead of the Nasdaq 100. The same week, Applied Materials posted record everything and fell 5 per cent; Cisco guided $4 billion above consensus and fell 4 per cent. The divergence between what the market owns too much of and what it owned too little of is the subject of our rotation analysis.
4. The Consumer Blinked
Friday’s retail sales report showed a 0.6 per cent monthly fall, the worst in over a year, with the control group down 0.4 per cent. Petrol prices and a relocated Prime Day explain some of it; they do not explain all of it, and the sequence of jobs, prices and spending all cooling together is now established, as we set out in the print that completed the picture.
5. Also This Week: A World Cup Quarter and a $104 Billion Backlog
The UK grew 0.4 per cent in the second quarter, a print the headlines credited to the World Cup while the detail credited business services, as covered in our UK GDP analysis. And CoreWeave doubled revenue while paying $640 million in quarterly interest, the clearest look yet at the debt financing underneath the AI build-out, dissected in the $104 billion backlog and the $640 million interest bill.
The Numbers
| Index / asset | Friday close | Week |
|---|---|---|
| S&P 500 | 7,785.76 | +0.4%, third straight weekly gain |
| Nasdaq Composite | 26,729.16 | +0.1% |
| Dow Jones Industrial Average | 53,732.41 | -0.6% |
| Russell 2000 | 3,068 | Record close, 27th of 2026 |
| US 10-year Treasury yield | 4.68% | Long yields firmer on the week |
| Brent crude | $87.19 | Higher on the week |
| WTI crude | $81.71 | Higher on the week |
What to Watch Next Week
- Monday 17 August: China’s July activity data, retail sales, industrial production and investment, plus the deadline attached to the US Treasury’s new Iran measures.
- Wednesday 20 August: FOMC minutes from the triple-dissent July meeting.
- Friday 21 August: Japan’s national CPI, feeding the Bank of Japan’s September decision with the yen near 159.
- 27-29 August: the Jackson Hole symposium, the Fed’s set-piece before September.
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