Key Takeaways
- The S&P 500 actually pushed to a new all-time high in late August (7,730.99) before easing back to close the month around 7,686 - the June-to-July dip fully round-tripped.
- A fresh source of volatility has emerged: renewed U.S.-Iran military exchanges around the Strait of Hormuz pushed oil above $85 and Treasury yields to their highest since January 2025.
- Nvidia's blowout August 26 earnings drove the market's best day since early August, a reminder that AI-spending sentiment can swing prices as fast in either direction.
- The Fed's next decision lands September 15-16, with the fed funds rate currently at 3.50%-3.75% and forecasters split between a hold and a hike given energy-driven inflation pressure.
- Panic-selling during a drop is still the single most reliable way to convert a paper loss into a permanent one - that hasn't changed no matter which headline is driving the week.
The S&P 500 hit an all-time high of 7,621 in June 2026, slid more than 4% into mid-July on AI-spending doubts, then round-tripped the whole move and set a fresh all-time high of 7,730.99 on August 26 — before wobbling again at the very end of the month as a six-month-old conflict between the U.S. and Iran flared back up.
None of that is a crash. The market’s actually higher than it was when I last updated this page. But the whiplash — new highs one week, geopolitical risk the next — is exactly the kind of chop that gets people asking me the same question I’ve fielded since 2008: should I sell?
I’ve written some version of this post during the 2008 financial crisis, the March 2020 COVID crash, and the 2022 bear market. The specific trigger changes — mortgage-backed securities, a pandemic, inflation and rate hikes, and now AI-bubble jitters layered on top of a Middle East conflict — but my answer hasn’t.
Why the Market Is Swinging Right Now
This year’s volatility has had two distinct drivers, and they’ve traded off the lead role. The first is the AI-spending question: doubts about whether the massive hyperscaler capex buildout is going to pay off fast enough to justify current valuations. That drove the June-to-July pullback, and it resurfaced briefly around Meta’s disappointing late-July earnings reaction before Nvidia’s August 26 blowout quarter — revenue up 106% year-over-year — helped push the S&P and Nasdaq to their best day since early August.
The second, newer driver is geopolitical. The U.S. and Iran, locked in a stalemate over control of the Strait of Hormuz since early 2026, traded fire again on August 31 for the first time in about a month — hitting oil tankers and Iranian rocket launchers near the strait. Oil crossed $85 a barrel and the 10-year Treasury yield jumped to its highest level since January 2025 on the news, even though the strait itself has stayed open to shipping.
The U.S. Treasury Department’s internal report warning that an AI-driven downturn could ripple across stock markets, private credit, and the utilities and data-center builders financing the buildout — the one explicitly comparing today’s spending to the 2000 dotcom bust — is still just a draft, not official policy. But it’s part of why “AI bubble” headlines keep resurfacing even as the S&P sets new highs.
Valuations have actually eased somewhat even as prices climbed: the S&P 500’s forward P/E ratio dipped below 20x by late July and was sitting around 19.5-20x by late August, down from the low-20s range earlier in the year, as earnings growth has partly caught up to prices. Nvidia alone pulled in $96.2 billion in quarterly revenue in its latest report, up 106% year over year — real growth, not vaporware. The disagreement is still about whether the price of that growth already assumes years of flawless execution, but the gap has narrowed some.
I’ve Seen This Movie Before
In 2008, the Dow was in free fall and I remember writing that the urge to sell was strong, even as my own portfolio was down more than 30% that year. In March 2020, it felt like the whole world was ending along with the market. In 2022, it was inflation and rate hikes grinding the market down for months, not days.
Each time, the headlines said this time was different. Each time, staying invested — not timing a bottom perfectly, just staying in — worked out better than getting out.
That doesn’t guarantee it plays out the same way this time. But it’s the pattern I’ve watched for almost two decades of writing about this, across three genuinely distinct kinds of crises.
What Not to Do
Selling out of the market during a drop locks in a paper loss as a real one. It also requires being right twice — you have to correctly time the exit and the re-entry, and most investors (professionals included) aren’t consistently good at either.
The data backs this up: investors who sold during the 2020 COVID crash and waited for things to “feel safe” again missed one of the fastest recoveries in market history. The S&P 500 round-tripped its entire pandemic loss in about five months. This year’s own June-to-August round trip is a smaller-scale version of the same lesson.
What to Actually Do When the Market Drops
Run the cash-needs test first. If you need the money in the next 1–3 years — a house down payment, tuition, a planned expense — it shouldn’t have been fully in stocks to begin with, and a downturn is a signal to get more conservative with that specific bucket, not your whole portfolio.
Keep contributing on schedule. If you’re dollar-cost-averaging into a 401(k) or IRA, a drop means your regular contribution buys more shares at a lower price. Stopping contributions during a dip is one of the more common mistakes I see — it’s the opposite of buy low, sell high.
Rebalance instead of exiting. If a drop has pushed your portfolio out of your target allocation (say, more bonds than you want because stocks fell), rebalance back toward your target rather than abandoning stocks altogether.
Consider tax-loss harvesting, not a full exit. If you hold individual positions at a loss outside a retirement account, selling those specific losers to offset gains elsewhere — while staying invested in the broader market — is a genuinely useful move during a downturn. I cover the mechanics and the wash-sale rule on the capital gains tax page.
Check your concentration, not just your total balance. If a big chunk of your portfolio is riding on AI-adjacent names specifically, a volatility spike in that theme hits you harder than it hits someone with a diversified portfolio. This is a good moment to actually look at what you own, not just the top-line number.
Keep a cash cushion outside the market. Having a few months of expenses parked in a high-yield savings account is what lets you ride out volatility without being forced to sell equities at a bad time to cover an emergency.
Things can shift quickly from here. Subscribe or follow us and I’ll update this page as the AI-spending and Iran-conflict stories develop.
When Selling Actually Makes Sense
Selling isn’t always the wrong call. A few situations where it genuinely is:
- You’re holding a specific company facing real fundamental damage (not just a sector-wide selloff), and the thesis you bought it on no longer holds.
- Your time horizon changed — retirement moved up, or you need the funds sooner than you originally planned.
- Your portfolio became so concentrated in one theme (AI infrastructure, a single employer’s stock, crypto) that a single sector’s swings can meaningfully affect your finances.
In all three cases, the trigger is a change in your own situation or the underlying company — not the fact that the market had a rough week.
Looking Ahead: What I’m Watching
A few things will determine whether this settles into a normal pattern of chop or turns into something bigger. The Fed’s next decision lands September 15-16 — the fed funds rate currently sits at 3.50%-3.75%, and forecasters are genuinely split between a hold and a quarter-point hike, with energy costs from the Iran conflict adding upside inflation risk to the calculus. Whether AI infrastructure spenders keep showing revenue that catches up to the capex will get its next real test during Q3 earnings in October. And whether the Strait of Hormuz standoff stays a contained, six-month stalemate or escalates further is now a genuine wildcard for oil prices and market sentiment that wasn’t on my radar as prominently a month ago.
None of these resolve in the next few weeks. I’ll keep this page updated as the picture becomes clearer.
Common Mistakes to Watch Out For
I get some version of these questions every time the market has a rough stretch:
- Panicking near the bottom. The scariest-feeling days are often close to a local low, not the start of a long slide — but you can’t know that in the moment, which is exactly why a pre-set plan matters more than a gut reaction.
- Stopping retirement contributions. Pausing your 401(k) or IRA contributions during a downturn means missing out on buying at lower prices — it’s a bigger mistake than it looks like at the time.
- Checking your portfolio daily. Frequent checking makes short-term noise feel more significant than it is and pushes people toward emotional decisions.
- Confusing a sector wobble with a market crash. AI-related volatility, or a geopolitical headline, isn’t the same as a broad recession signal — check whether the pullback is concentrated in one theme before assuming it’s systemic.
- Trying to time the exact bottom to buy back in. Missing just the 10 best market days over a decade can cut your total return roughly in half — the cost of waiting for a “clear” signal is usually higher than the cost of staying invested.
I’ve also written more about How to Invest Without FOMO: Smart Strategies for 2026 and AI Infrastructure Investing: How to Think About the Trade Behind the AI Boom.
