The S&P 500 increased 272 basis points in August, bringing its year-to-date total return to 13.14%. The Bloomberg U.S. Aggregate Bond Index was up 38 basis points for the month but remains down 0.31% year to date. The S&P 500 Equal Weight Index gained 206 basis points in August, bringing its year-to-date return to 15.59%. What is frequently called the democratization of investing is really the removal of friction. Commission-free trading, access through mobile devices, and high-risk products such as zero-days-to-expiration options (0DTE) have encouraged frantic activity. The S&P 500 30-Day Realized Dispersion Index reading of 31.34 on August 31, 2026, reflects the gyration of individual stocks in August even as the market appeared calm. Individual stock volatility is also visible in Google’s price action. Google’s market cap has fallen 15%, or over $700 billion, since peaking on May 13, 2026. It is as if all the real estate in San Diego and San Francisco suddenly disappeared, and it equals 3.5x the inflation-adjusted financial damage of the costliest storm in US history, Hurricane Katrina. In our portfolios we dampen extreme price volatility through diversification among US and international equities, fixed income, alternatives, and cash holdings, as well as through strict risk control. Our portfolio distribution yields have also benefited from the generous variable dividends paid by many of our shipping positions. When shipping rates normalize, so will their dividends, but in the meantime, those distributions are offsetting volatility and contributing to our returns.
Tanker rates hit historical highs in August, and some dry bulk segments experienced their best markets since 2022. The reasons vary by sector, but in general shipping is benefiting from inefficiencies created by various wars and the Super El Niño. As we wrote in our last blog post, momentum investors and algos have also arrived in shipping equities. On Wednesday, August 26, reacting to an inconsequential headline about a potential agreement between Oman and Iran, momentum investors sold shipping stocks, regardless of whether a segment had exposure to the Strait of Hormuz. One shipping equity of ours opened up 1.6% on Wednesday, August 26, after reporting excellent earnings, then traded down as much as 6.2% along with the rest of the group. On Wednesday afternoon, when it became apparent there was no agreement, the stock began recovering its losses. The stock closed on Friday, August 28, up 9.0% from Wednesday’s low. Since no one can predict what momentum investors and algos will do, we counsel focusing on informed choices. Ultimately, it is these decisions that will create value over the long term.
In October 2024, we wrote that, under the guise of EU industrial policy, Europe was slowly committing energy and economic suicide, with the UK the clear leader in the European degrowth movement. Automotive manufacturing is one of Europe’s most vital and largest industrial sectors, contributing roughly 7% of EU GDP and supporting over 13 million jobs. The industry is being eviscerated by Chinese EV exports. The British government seemingly welcomes Chinese automakers, with UK registrations of Chinese cars rising from 5% of the new car market in 2024 to 15% in 2026. One of our largest holdings announced this week that it is increasing its fleet of pure car and truck carriers by 57%, from 7 to 11 vessels. While we can’t influence political and economic choices, we can make sure, as owners of shipping equities, we benefit from them.
