To summarize: Markets broadened in August, while borrowing costs moved higher. Investors looked beyond the maga-cap U.S. tech companies, with strength spreading across company sizes, international developed markets, and emerging markets. At the same time, government bond yields rose in the U.S. and overseas, increasing pressure on financing costs. Normally, higher rates would slow investment, construction, and hiring, but this cycle looks different. Spending tied to AI, energy, and reshoring remains a strategic priority, helping fuel factory orders, job growth, and broader economic momentum.
The big takeaway – Growth is broadening and AI investment is carrying it. But capital is more expensive, and that needs to be reflected in every forecast, financing decision, and growth plan.
In the markets: Equity markets are showing broader momentum as investors look beyond the largest U.S. tech companies for growth opportunities. The equal-weighted S&P 500, developed international markets, small caps, and emerging markets are gaining ground, signaling wider confidence in the global economy. At the same time, rising oil prices and higher government bond yields are keeping inflation and borrowing costs higher, pressuring fixed income returns.
AI infrastructure fuels growth: AI investment continues to help keep the economy moving, even as higher rates typically slow construction and hiring. Strategic priorities like AI infrastructure, energy capacity, and reshoring are proving more resilient to borrowing costs, with hyperscale capital spending expected to approach 3% of GDP next year. That investment is rippling across data centers, power, equipment, construction, and services, supporting growth in manufacturing orders and jobs. While the economic impact is smaller than the pre-financial crisis housing boom, today’s AI buildout is expanding capacity and strengthening the real economy rather than simply chasing demand.
The cost of capital keeps climbing: Rising government bond yields are weighing on returns and increasing borrowing costs across developed markets, not just in the U.S. Energy prices, fiscal deficits and efforts to support the yen are pushing sovereign yields higher globally. Strong earnings expectations offer a bright spot, with analysis forecasting nearly 20% to 35% growth across company sizes over the next year. Still, businesses planning to finance growth, acquisitions, or real estate projects should account for rates staying elevated.
Top headlines: We’re reading about the financing machinery Wall Street and Nvidia are building for the AI boom, what conflicting credit card data says about the U.S. consumer, a potential slowdown in home remodeling, and Stripe’s move to buy OpenRouter.
Related resources:
- AI: Why Wall Street and Nvidia are building an exotic money pipeline for the AI boom
- Consumers: How distressed are consumers? Diverging credit card data’s confusing picture explained
- Residential real estate: Remodeling spending poised for further slowdown
- AI & fintech: Stripe to buy OpenRouter as fintech expands deeper into AI
Disclosures
Investment advisory services are offered by Aprio Wealth Management, LLC, a Securities and Exchange Commission Registered Investment Advisor. Opinions expressed are as of the publication date and subject to change without notice. Aprio Wealth Management, LLC shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions contained herein or their use, which do not constitute investment advice, are provided as of the date written, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. This commentary is for informational purposes only and has not been tailored to suit any individual. References to specific securities or investment options should not be considered an offer to purchase or sell that specific investment.
This commentary contains certain forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or implied by those projected in the forward-looking statements for any reason. No graph, chart, or formula in this presentation can be used in and of itself to determine which securities to buy or sell, when to buy or sell securities, whether to invest using this investment strategy, or whether to engage Aprio Wealth Management, LLC’s investment advisory services.
Investments in securities are subject to investment risk, including possible loss of principal. Prices of securities may fluctuate from time to time and may even become valueless. Any securities mentioned in this commentary are not FDIC-insured, may lose value, and are not guaranteed by a bank or other financial institution. Before making any investment decision, investors should read and consider all the relevant investment product information. Investors should seriously consider if the investment is suitable for them by referencing their own financial position, investment objectives, and risk profile before making any investment decision. There can be no assurance that any financial strategy will be successful.
Certain investor qualifications may apply. Definitions for Qualified Purchaser, Qualified Client and Accredited Investor can be found from multiple sources online or in the SEC’s glossary found here https://www.sec.gov/education/glossary/jargon-z#Q