U.S. Equities Retreat

U.S. Equities Retreat as Higher Yields and Valuation Concerns Test the Rally

August 21, 2026

Dave Dookie, Managing Director

• U.S. equities sold off over five days: the S&P 500 fell 1.98%, the Dow declined 2.01%, and the Nasdaq dropped 2.75%, led by weakness in highly valued technology stocks.

• Higher Treasury yields pressured valuations, with the U.S. 10-year yield near 4.70% and longer maturities above 5.2%. Elevated oil prices and geopolitical uncertainty also contributed to volatility.

• International markets diverged: the FTSE 100 gained 0.62%, major European indices declined, Japan’s Nikkei fell 3.93%, and Hong Kong’s Hang Seng rose 3.55%.

• Trinidad and Tobago equities advanced modestly, while trading volume rose 52.7% to 2.69 million shares and market value increased 56.3% to TT$22.56 million.

• Caribbean sovereign bonds remained stable. Trinidad’s yields ranged from about 5.50% to 6.37%, while Jamaica, Barbados, and the Dominican Republic offered selected yields of roughly 5.39% to 6.70%.

U.S. equities experienced a broad pullback over the past five trading days, with the S&P 500 down 1.98%, the Dow Jones Industrial Average falling 2.01%, and the Nasdaq Composite declining 2.75%. The weakness was particularly evident in technology, where investors reassessed elevated valuations after a strong year-to-date advance. Broadcom fell 11.22% over five days, Meta declined 6.77%, and Alphabet slipped 0.31%, while Apple was comparatively resilient with a 1.12% gain. Profit-taking, concerns over the scale of AI-related capital expenditure, and the persistence of high long-term interest rates all contributed to the more defensive tone.

Higher Treasury yields remain an important constraint on equity valuations. The U.S. 10-year Treasury yield was around 4.70%, while the 20-year and 30-year yields exceeded 5.2%, increasing the discount rate applied to future corporate earnings. Markets were also unsettled by the Treasury’s announcement that it would increase repurchases of longer-dated government bonds, while geopolitical tensions involving Iran and oil prices near the mid-US$90s added further uncertainty. Looking toward year-end, volatility is likely to remain elevated. However, continued earnings growth and any evidence of softer inflation or slower economic activity could eventually ease Treasury yields and support equities. The most likely environment is therefore one of greater selectivity rather than a broad continuation of the earlier rally, with earnings quality and valuation becoming increasingly

important.

U.S. sector performance reflected this rotation. Energy related assets strengthened as Brent Crude Oil traded around US$94 per barrel, while selected technology and consumer-related companies weakened. The market’s longer-term performance remains strong; the S&P 500 and Nasdaq are still approximately 20.9% and 23.1% higher over one year but the recent correction demonstrates the sensitivity of expensive growth stocks to movements in bond yields.

In the United Kingdom, the FTSE 100 gained approximately 0.62% over five days, outperforming the U.S. as its greater exposure to energy, financials and defensive companies provided support. Across Europe, markets were weaker overall. The STOXX Europe 600 declined 0.56%, the Euro Stoxx 50 fell 1.18%, Germany’s DAX slipped 1.15%, France’s CAC 40 declined 1.76%, and Italy’s FTSE MIB lost 1.71%. Higher energy costs and concerns surrounding global growth offset support from relatively attractive valuations.

Asian markets were mixed. Japan’s Nikkei 225 declined approximately 3.93%, reflecting profit-taking after an exceptional longer-term rally. China’s Shanghai Composite slipped 0.56%, while Hong Kong’s Hang Seng gained 3.55%, providing a notable regional exception. Australia’s ASX 200 declined about 0.62%. Asia therefore continues to show substantial divergence as investors balance domestic policy conditions, currency movements and technology sector exposure.

In Trinidad and Tobago, the domestic equity market moved higher despite the weaker international backdrop. The Composite Index gained 0.21%, the All T&T Index rose 0.18%, and the Cross Listed Index advanced 0.29%. Trading activity strengthened considerably, with 2.69 million shares changing hand, up 52.7% while market value increased 56.3% to TT$22.56 million. Prestige Holdings rose 13.34%, GraceKennedy gained 10.51%, and National Flour Mills advanced 7.64%. Commercial-bank excess liquidity remained ample at approximately TT$4.12 billion.

Caribbean USD sovereign markets remained relatively stable. Trinidad and Tobago’s 2030 bond was offered around 96.45 to 96.75, yielding approximately 5.54% on the offer, while the 2034, 2036 and 2038 maturities offered yields of roughly 6.12%, 6.25% and 6.37%. Jamaica’s 2036, 2039 and 2045 bonds were offered around 119.00, 118.05 and 117.55, with yields between 5.83% and 6.28%. Barbados’ 2029 and 2035 bonds were offered near 101.65 and 106.75, yielding approximately 5.39% and 6.70%. The Dominican Republic curve remained well supported, with the 2030 around 96.90, yielding 5.50%, while the 2036 offered near 102.65, yielding approximately 6.23%. Trinidad continues to trade as a relatively defensive regional credit, while Barbados and longer Dominican Republic maturities offer higher carry for investors accepting greater credit and duration risk.

About the author: Dave Dookie is the Managing Director of Waterloo Capital Advisors Limited, a Trinidad and Tobago based financial advisory firm specializing in investment management, capital markets and structured finance. He has advised governments, financial institutions, and energy companies on debt issuance, project financing, and strategic capital raising across the Caribbean. He holds degrees and advanced qualifications from the London School of Economics and Political Science (LSE) and the University of London and has completed advanced training in data science through the MIT Applied Data Science Program.

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