The final week of summer saw the S&P 500 (Index: SPX) close out the week at 7,718.60, slightly up over the preceding week's close and one percent below its 13 August 2026 record high.

As expected, investors focused on the upcoming quarter of 2026-Q4 in setting stock prices. The future quarter has become the focus because of the Fed's ongoing "will they or won't they hike rates during the quarter" drama.

Speaking of which, the CME Group's FedWatch Tool projects a 59% probability the Fed will hike the Federal Funds Rate by a quarter percent on 16 September (2026-Q3), with a little under 41% chance of holding at its current target range of 3.50-3.75%. The big change from the previous week however is that the FedWatch Tool now projects the Fed will delay its next quarter point rate hike until 27 January (2027-Q1), although it still gives a 39% probability of an earlier rate hike on 8 December (2026-Q4).

The continuing uncertainty provides investors with an incentive to set their attention on 2026-Q4. The latest update of the alternative futures chart shows the S&P 500's trajectory remains consistent with the approximate level the dividend futures-based model would project for it provided investors focus their forward-looking attention upon 2026-Q4.

Here are the market moving headlines of the week that was:

Monday, 31 August 2026

• Signs and portents for the U.S. economy:
• Oil settles up by more than 2.5% as US and Iran resume military attacks
• Yields rise, oil jumps; US and Iran resume military attacks
• Trump announces deal with Venezuela to secure more than 65 billion barrels of oil reserves
• Trump says US is taking partial control of Venezuela's vast oil reserves
• Fed minion happy to see money being used productively, says policymakers need a new playbook:
• Fed's Warsh says past global savings glut is turning into investment surge
• Warsh Says the Old Economic Playbook Is Obsolete
• Bigger trouble, stimulus developing in China:
• China's three biggest airlines post heavy first-half losses as fuel shock bites
• BOJ minions / Bigger trouble developing in Japan:
• Bessent says disorderly yen moves can destabilize global markets
• ECB minions / Bigger trouble developing in Eurozone:
• Europe's central bankers fear more turbulence in testy U.S. relations
• Wall Street ends lower as Middle East tensions flare
• Wall Street closes lower as oil prices jump, indexes notch monthly gains
• S&P 500 earnings growth broadens as corporate profits stay strong

Tuesday, 1 September 2026

• Signs and portents for the U.S. economy:
• US factory activity slows in August; input prices remain elevated
• US job openings rise in July after sharp downward revision in prior month
• Oil jumps 5% as the U.S. strikes Iran and the Hormuz risk premium returns
• 10-year yield hits highest since January 2025 as higher oil prices stoke inflation worries
• US construction spending drops to nearly three-year low in July
• Fed minions get in line behind new Fed chief minion's policies:
• Fed's Barr open to rate hike if inflation does not moderate
• Warsh scored an easy win in Jackson Hole. The hard work starts now
• Bigger trouble developing out of China as growth improves:
• Chinese shipper COSCO collects intel for Beijing with concealed equipment, US officials say
• China's August factory activity picks up as demand improves, PMI shows
• BOJ minions, U.S. Treasury watching Japan's currency:
• Yen hangs near 160 amid BOJ rate-hike bets, dollar wobbles
• Bessent expects Japan to take action to boost yen, signals BOJ rate-hike chance
• Japan faces day of policy reckoning as Bessent calls time on big stimulus
• Growth signs in Japan's economy:
• Japan manufacturing new business rises at fastest pace since 2018, PMI shows
• Bigger trouble developing everywhere:
• Global bond rout deepens as Japan yield hits key milestone
• Government borrowing costs rise anew, adding to pressure on global policymakers
• Wall Street finished in the red while yields advanced at the start of September
• Wall Street ends lower as higher yields, rising oil prices mark shaky start to September

Wednesday, 2 September 2026

• Signs and portents for the U.S. economy:
• Rise in US factory orders beats expectations in July
• Data centers are leaving office construction in the dust
• Not just Nvidia: these power and cooling firms are riding the trillion-dollar data centre boom
• Oil settles 1% higher, as US-Iran strikes threaten supplies
• OPEC+ likely to keep oil output policy unchanged on Sunday, sources say
• Fed minions say bond yields are rising because U.S. economy is strong:
• Fed's Williams ties rising bond yields to strong economy, CNBC reports
• 10-year U.S. Treasury yield hits highest level since November 2023
• Bigger trouble developing out of China:
• China never deliberately pursues trade surplus, central bank governor says
• Bigger trouble developing in Japan, BOJ minions standing by to hike interest rates more: :
• Japan's benchmark bond yield rises to 3% for first time in 30 years
• How Japan's bond rout is turning the tide of global capital
• Bond selloff is likely amplified by obscure economic rate
• BOJ's Takata urges nimble rate hikes, says 2026 marks a turning point
• BOJ chief signals chance of September rate hike, debate on price risks
• Bessent urges BOJ chief to combat weak yen with 'decisive' monetary steps
• Bigger trouble developing in Eurozone:
• US tech firms may crowd out others in euro bond market and raise credit risk
• Wall Street finished higher after the previous session's sell-off
• Wall St ends higher as stocks reclaim some shine

Thursday, 3 September 2026

• Signs and portents for the U.S. economy:
• Treasury yields fall after top Fed official signals support for rate hold
• World's Largest Sovereign Wealth Fund Cuts Treasury Holdings... But It's Not What You Think
• Oil prices mixed as investors weigh Middle East escalation, chance of Russia-Ukraine peace deal
• US job growth expected to rebound in August
• US trade deficit widens in July; capital goods imports hit record high
• Strong demand boosts US services sector activity in August
• Fed minions see growth, moderate inflation:
• Fed survey shows economic activity edged up, prices rose moderately in recent weeks
• Fed's Waller says safety premium for Treasuries is gone, pushing neutral rate higher
• Fed's Waller channels his inner John Lennon with a plea to 'give disinflation a chance'
• Treasury yields fall after top Fed official signals support for rate hold
• Bond selloff is likely amplified by obscure economic rate
• Bigger stimulus, growth signs developing in China:
• China to support 'little giants' and other emerging companies in plan to boost jobs and innovation
• China services activity quickens on stronger domestic demand, private PMI shows
• BOJ minions / Bigger trouble developing in Japan:
• Japan services growth hits five-month high, PMI shows
• Yen rallies sharply as markets raise bets on Bank of Japan rate hikes
• Bigger trouble developing in one particular Eurozone nation:
• German firms feel growing pressure from Chinese rivals, survey finds
• Euro zone overall business growth held steady in August, PMI shows
• Wall Street closed higher after the latest jobless claims and trade data
• Wall Street ends sharply higher as Waller remarks ease rate hike fears

Friday, 4 September 2026

• Signs and portents for the U.S. economy:
• US nonfarm payrolls blow past expectations in August; unemployment rate steady at 4.1%
• Strong August jobs report sends yields higher
• Oil ends week higher on renewed US-Iran strikes, diesel hits record
• Fed minions expected to hike rates in response to better than expected jobs report:
• Fed rate hike back in focus after strong jobs report
• Trump says if the Fed doesn't cut rates, he'll stop trading with some nations
• Bigger stimulus developing in China:
• Chinese banks purchasing Treasuries after wooing dollar deposits
• BOJ, JapanGov minions efforts to prop up Japan's currency being taken more seriously:
• Japan warns against weak yen, stands ready to intervene
• Yen's changing fortunes might finally be spooking the bears
• Japan July household spending falls at fastest pace in 2-1/2 years, signs of slowing economy:
• Economists say ECB minions excited to hike Eurozone interest rates one last time, another ECB minion thinking about their next job:
• ECB to raise rates a second time in September, but then done, say economists
• ECB's Schnabel may leave early for IMF job, Handelsblatt reports
• S&P 500 ends nearly flat for week as strong jobs data weighs on markets
• Wall Street ends lower as solid jobs data fuels hawkish Fed bets

The headlines out of Japan suggest the recent rising yields of U.S. Treasuries have a "made in Japan" element to them. This factor may be significant because they would have an effect on the U.S. stock market, with higher yields depressing stock prices because of the resulting higher cost of debt. The effect would be most pronounced on firms that are looking to utilize significant debt financing to support their growth.

The Atlanta Fed's GDPNow tool anticipates +4.7% real GDP growth for the U.S. economy in 2026-Q3, ticking up from the +4.6% annualized growth it projected a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull and bear enjoying a Labor Day holiday barbecue as the bear says ‘I CAN'T BELIEVE SUMMER IS OVER ALREADY! WHAT ARE YOU LOOKING FORWARD TO THE REST OF THE YEAR?’" We're not sure what the bull is thinking about with what they're barbecuing - perhaps they're a soy-based alternative to what they look like!

We first wrote about Hauser's Law in 2009. At the time, we described it as "one of the stranger phenomenons in economic data". The law itself was proposed by W. Kurt Hauser in 1993, who observed:

No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP.

In 2009, we found total tax collections the U.S. government averaged 17.8% of GDP in the years from 1946 through 2008, with a standard deviation of 1.2% of GDP. Six years later, we revisited it once again and found that while the standard deviation was the same, average total tax collections from 1946 through 2018 was lowered to 16.8% of GDP because of 2013's comprehensive revision of GDP that significantly boosted historic GDP estimates after the basic GDP formula was redefined.

Seven years later, we're revisiting the historic data once again to see if it still holds. Spoiler alert: it does!

Here's a triple-set of charts to show off Hauser's Law in action!

Since we're now spanning 80 years worth of data, during which the U.S.' maximum income tax rate has ranged between 28% and 92% of income, we confirm once again that the U.S. government's total tax collections have averaged 16.8% with a standard deviation of 1.2% of GDP from 1946 through 2025. If you know your normal distribution bell curve from statistics, that means over 99% of the U.S. government's total tax collections from 1946 through 2026 would be expected to fall between 13.2% and 20.4% of GDP, which they have.

The pattern also holds true for U.S. personal income tax collections, although here, the average is 7.7% of GDP and the standard deviation is 0.8% of GDP.

What all these numbers mean is that the U.S. government's tax collections have been remarkably stable as a percent of GDP, or the national income, over the last eight decades, regardless of how the top income tax rate has been set. We think that represents a political equilibrium, especially as higher rates of tax collections have not been able to be sustained.

There are just four periods where tax collections rose more than one standard deviation above the mean level, none of which proved to be sustainable.

1. In 1968, the Democratic U.S. Congress and President Lyndon Johnson passed a shock 10% income surtax that took effect in mid-year, spiking the top tax rate from 70% to 77% and increasing the amount collected from top income tax earners by an additional 10%. Coupled with a spike in inflation, for which personal income taxes were not adjusted to compensate, this tax hike led to outsize income tax collections in that year.
2. The sustained high inflation of 1978 (7.62%), 1979 (11.22%), 1980 (13.58%) and 1981 (10.35%) led to higher tax collections through bracket creep, as income tax brackets in the U.S. were not adjusted for inflation until 1985 as part of President Ronald Reagan's first term Economic Recovery Tax Act.
3. Beginning in April 1997, a cut in the capital gains tax rate caused the Dot Com Stock Market Bubble to being inflating. As it expanded, the bubble minted a large number of new millionaires as investors swarmed to participate in Internet and "tech" company initial public offerings or private capital ventures, which in turn, inflated personal income tax collections. Unfortunately, like the vaporware produced by many of the companies that sprang up to exploit the investor buying frenzy, the illusion of prosperity could not be sustained and tax collections crashed with the incomes of the Internet titans in the bursting of the bubble, leading to the recession that followed. It eventually came to an end in 2003 after the capital gains tax rate was increased to be equal to the dividend tax rate once again.
4. In 2022, tax collections spiked with the recovery from the coronavirus pandemic after government-mandated lockdowns and restrictions on businesses were lifted.

There's one final piece of the puzzle we haven't tackled, and that's why the U.S. national debt has grown so large even as federal tax collections have been so relatively stable. Here we find three factors that have contributed to its growth:

1. The launch of Medicare in 1965 coincides with a period in which government spending no longer drops below the long-term average of tax collections. Before Medicare was passed into law, government spending only surged above that level when wars were fought, dropping back to pre-war levels after they ended. World War 2 is a classic example, with its drawdown in spending taking place in the years after it ended in 1945. The 1980s Cold War defense buildup also shows the same pattern, with spending returning to pre-buildup levels as a percent of GDP in the 1990s as a peace dividend.
2. The Great Financial Crisis of 2008 led to massive bailouts by the U.S. government. Even though that crisis ended, spending failed to return to its pre-crisis level because President Obama's Affordable Care Act permanently inflated the government's spending from 2014 onward.
3. The Coronavirus Pandemic of 2020 led to massive government subsidies to offset the impact of the extreme economic disruption caused by state and local government lockdowns. However, two Biden administration initiatives combined to permanently inflate government spending above their pre-crisis levels: the American Recovery Act with its inflationary impact and the cynically-named Inflation Reduction Act that further boosted spending. These two initiatives kept government spending elevated at levels far above what the U.S. government can reasonably expect to collect in taxes based on the last 80 years of experience.

And that, in a nutshell, is why the U.S. government has gone from running mostly balanced budgets in the years before 1965 to running consistently in the red in the years since with few exceptions. The upward ratcheting of government spending in the years since 1965, and particularly since 2008 to levels far above what the U.S. government is capable of sustaining through its stable tax collections is why the national debt has grown to exceed $40 trillion.

Previously on Political Calculations

• Hauser's Law (2009)
• Is Hauser's Law Still Valid? (2011)
• Hauser's Law, Updated for 2019
• Hauser's Law in Action: 1946-2025

The median price of new homes sold in the United States paid by their buyers is declining.

Incentives provided by homebuilders to entice sales is offsetting an increase in mortgage rates in recent months, improving the affordability of new homes. So much so that new homes have become relatively more affordable than existing homes.

Here are the three numbers that define how affordable a new home is for a typical American household in July 2026 and how they've changed from the values we reported for May 2026:

• Median new home sale price: $393,800 (decrease of $31,100)
• Median household income: $88,150 (increase of $504)
• Average 30-year conventional fixed mortgage rate: 6.54% (increase of 0.10%)

Assuming a 0% down payment, a new home sold in July 2026 at the nation's median sale would have a mortgage payment that consumes 34% of the income earned by a household at the exact middle of the U.S. spectrum of income. The following chart reveals the typical new home sold in the U.S. moved to fall within the affordable reach of the typical American household during July 2026:

The relative affordability thresholds indicated on the chart are defined by the 28/36 rule that mortgage lenders traditionally use to determine whether to extend a mortgage to new home buyers. Here, a monthly mortgage payment that consumes more than 36% of a household's income means that the median new home sold is fully outside the affordable reach of a household earning the median income, even if it has no other debts. At the other end of the rule, a mortgage that does not exceed 28% of a household's income is considered affordable even with average levels of other kinds of debt.

July 2026's relative affordability level falls between these two levels, but nearer the upper end, which means a new home is affordable for a household earning the nation's median household income provided it maintains a low level of other kinds of debt.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 25 August 2026.

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 25 August 2026.

Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 1 September 2026. Note: Starting from December 2022, the estimated monthly mortgage rate is taken as the average of weekly 30-year conventional mortgage rates recorded during the calendar month.

Image Credit: Couple sitting among moving boxes in new home photo by Vitaly Gariev on Unsplash.

The S&P 500 (Index: SPX) rebounded back above its mean trend in August 2026 after briefly breaking below it.

Through the end of trading on Monday, 31 August 2026, the index' value was just slightly below its its trailing 20-day moving average. Meanwhile, the moving average itself was about 96 points (or about 1%) above the level the mean trend trajectory the index has established during its current period of relative order, which has largely held in the 32 months since 31 December 2023.

The following chart visualizes the relationship between the value of the S&P 500 and its underlying trailing year dividends per share from 29 December 2023 through 31 August 2026:

Previously on Political Calculations

• How Big is the AI Bubble and Is It Really a Bubble?
• The Definition of a Bubble
• The Ultimate Sell Signal
• What Caused the Dot Com Bubble to Begin and What Caused It to End?
• The Black Monday Stock Market Crash Explained
• Not Necessarily Wrong But Useful

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull and bear bouncing on a trampoline while looking at a stock chart labeled 'S&P 500'".

Motio Research's initial estimate of U.S. median household income for July 2026 is $87,810, a $300 (or 0.34%) decrease from the firm's initial estimate of $88,110 for June 2026.

Here are screenshots of the interactive charts Motio Research provides to visualize trends in the U.S.' median household income. The first chart presents the firm's Household Income Index, which is based on three-month moving average that sets the period of January 2010 through March 2010 at a value of 100 after making adjustments for inflation and seasonality in the data. The second chart presents their monthly median household income estimates in nominal (not adjusted for inflation) terms for the period from January 2010 through July 2026.

Monthly Household Income Index

Median Household Income Estimates

Here is Motio Research's commentary for July 2026, in which they raise an alarm for seeing their median household income estimates and index record their second decline in as many months:

Motio's original monthly headline series, which begins in 2010, includes Census-imputed income data and shows a recent deterioration in the income level.

Nominal median household income fell 0.3 percent in July to $87,810, its second consecutive monthly decline. The combined June–July fall of 0.6 percent was the second-largest two-month decline outside the pandemic disruption in the series, exceeded only in May–June 2010, when household income was still contracting in the aftermath of the 2007–09 recession.

Real median household income fell 0.7 percent in July to $88,060, following a 0.5 percent decline in June. The U.S. Real Median Household Income Index fell to 118.0.

“These readings do not establish a formal turning point,,” said Romina Soria, co-founder and principal economist at Motio Research. “But year-over-year growth in real household income has slowed to nearly zero, while both real and nominal income have now fallen for two straight months. The next releases will show whether household income rebounds or continues to weaken.”

Since Motio Research's estimates are derived from survey-based data, it's possible they're seeing some noise from turnover in the sampled population being surveyed each month. It's more likely however the survey-based data is capturing changes that the data Political Calculations uses to derive our complementary estimates of median household income is slower to register.

At least, that's our experience from seeing our estimates lag behind the upward surge the Motio's survey-based estimates recorded a year earlier. We'll see if that pattern continues with next month's data releases.

Analyst's Notes

As we mentioned, Political Calculations produces monthly median household income estimates using an alternate methodology that complements Motio Research's survey-based estimates. In July 2026, Political Calculations' initial estimate of median household income is $88,150. This estimate is $216 (or 0.25%) higher than our initial estimate of $87,934 for June 2026's median household income.

The following chart presents our estimates of U.S. median household income, both adjusted for inflation (blue) and not-adjusted for inflation (red) for each month from January 2000 through July 2026.

Political Calculations' July 2026 estimate is $340 (0.4%) below Motio Research's estimate of $87,810 for the month. While we're still seeing our median household estimates rise, as opposed to the declines Motio Research has registered in their estimates during the last two months, we are seeing the rate of increase of our estimates slow. The change represents a negative change in momentum for median household income and is a cause for concern.

References

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Population. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 28 August 2026. Accessed: 28 August 2026.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Compensation of Employees, Received: Wage and Salary Disbursements. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 28 August 2026. Accessed: 28 August 2026.

Image credit: U.S. Census Bureau. We modified the public domain image to make it more generally applicable beyond reporting the median household income from 2022.