Weekly Hotline: August 28, 2026
AI speculation continues to drive the market as major indexes moved higher this week, even while breadth was negative.
MACROECONOMIC UPDATE
- New Home Sales fell -10.5% in July as the housing market remains broadly stagnant.
- The Personal Consumption Expenditures (PCE) Price Index showed sticky inflation as the year-over-year rate held steady at 3.7% and the Core rate, which excludes the volatile food and energy components, was unchanged at 3.3%. This is an important warning to the Fed as inflation remains well above their 2% target and is not making sustained downward progress.
- Consumer Confidence ticked down from 90.2 to 89.4 as consumers’ outlook for business and labor market conditions deteriorated.
- Consumer Sentiment, which focuses on views of personal finances, dropped from 55.2 to 51.7 in its final reading for August as expectations for the future and assessments of current conditions both fell on concerns regarding cost of living.
TECHNICAL UPDATE
- Bearish Distribution in the InvesTech Negative Leadership Composite (NLC) eased slightly this week to -11.9. The slight improvement in leadership, however, was tempered by a notable decline in breadth as investors chased a small number of overvalued momentum stocks.
- The InvesTech AI and Gorilla Indexes are both testing their highs. The AI Index hit its recent top earlier this month, but the Gorilla Index has yet to surpass its peak from late 2025. If both Indexes reach new highs, it would signal that investor speculation is increasing.
INVESTECH MODEL FUND PORTFOLIO
There are no changes to the Model Fund Portfolio this week, which is comprised of 62.5% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 27.5% cash held in short-term Treasurys or a money market fund. This results in 57.5% net equity exposure.
