Smart Investor: The Boon of Rising Bond Yields, Your AI- Dominated Portfolio, and 2026’s Surprising Winners

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In this week’s newsletter:

• Market Wrap: Stocks Fell as Healthcare and Basic Materials Declined
• Why Higher Bond Yields Can Be ‘a Great Thing’ for Investors
• August CPI Report Highlights Stubbornly High Inflation
• Why the Odds of a Fed Interest Rate Hike Just Shot Higher
• Bank of Japan Outlook: Rate Hike Likely to Support Yen
• How AI Is Taking Over Your Portfolio
• Chinese AI Stocks Have Been On a Tear—Why US Investors Have Been Left Out so Far
• The Surprising Stocks Beating the Market in 2026
• Weekly Calendar

The Federal Reserve may be about to raise interest rates for the first time since 2023, and bond yields are hitting their highest levels in decades. Meanwhile, the stock market is cruising just below all-time highs and finished last week with just small losses. Strong earnings and the tidal wave of artificial intelligence spending are the main reasons cited for the market’s resilience, but there’s little question that the interest rate environment has shifted.

In the background, inflation is stubbornly high. While Friday’s Consumer Price Index report was largely as forecast, Colin Laidley reports that expectations for a slowing in the upward march of prices remain just that—expectations. While bond traders had been leaning toward a Fed rate hike at the coming week’s meeting, those odds jumped immediately after the CPI data hit the tape.

In the bond market, prices have fallen, while yields have continued rising. The yield on the US Treasury 10-year bond —a critical benchmark for mortgages and corporate borrowing—approached 5.0%, up from 4.2% at the start of the year. As Morningstar senior US economist Preston Caldwell writes, there’s no reason to panic. In fact, for income investors, one analyst calls higher bond yields “a great thing.” Sarah Hansen explains.

As we’ve noted in recent weeks, bond yields and official interest rates are rising across the world’s major economies. The European Central Bank raised rates on Thursday, and the Bank of Japan is expected to do the same this coming week.

Back in the stock market, artificial intelligence continues to dominate conversations and portfolios. I sat down with Ivanna Hampton to chat about the remarkable degree to which technology stocks, led by AI names, have become huge weightings in our portfolios, including some unlikely places. Check out the video. Meanwhile, Leslie Norton looks at one area where an AI boom isn’t translating to gains for US investors: Chinese stocks.

Lastly, Dan Lefkovitz gives us a reprieve from thinking about AI. It turns out that companies spending on good old dividends and buybacks, not data centers, are outperforming.

As always, visit our Markets page for our latest coverage, along with our full weekly calendar of key upcoming data and events.