Weekly Market Recap: Week of August 31, 2026

The week in review

• The second 2Q26 GDP estimate was unchanged at 1.5%
• PCE remained at 3.7% y/y

The week ahead

• PMIs
• Employment report

Thought of the Week

Despite bouts of volatility, markets have been supported by solid economic activity and strong earnings growth throughout 2026. As a result, high yield spreads have narrowed to extremely tight levels, now sitting in the 4th percentile versus history. At the same time, the high yield market has seen a recent uptick in the default rate over the last 12 months, currently sitting at 2.0%. While this figure is the highest it’s been since January 2024, looking under the hood shows that these defaults are mainly concentrated in the CCC credit bucket.

So far this year, there have been twelve payment defaults, mainly concentrated in the cable, paper and industrial sectors. The chart of the week shows that even despite these major defaults in CCC, the overall HY default rate has only moved modestly. This reflects the fact that the U.S. high yield index now includes a much smaller share of CCC than in past cycles. This composition shift could help keep default rates below historical norms. As defaults tick up, questions have emerged about the broader health of the high yield market, but it’s important to note that much of the year-to-date default activity has come from repeat offenders. This points to company specific troubles, rather than issues with the health of the overall high yield market.

Given this, high yield investors should be thoughtful with their manager selection in order to decrease some of their exposure to default risk. High-yield credit conditions remain positive, reflecting a strong corporate earnings season and credit upgrades outpacing downgrades for the fifth month straight. With the index currently yielding around 7.3%, high yield continues to present an attractive income opportunity in portfolios.

Chart of the Week: Source: J.P. Morgan Research, J.P. Morgan Asset
Management. Default rates shown by credit rating do not include
distressed exchanges and are grouped by rating 12 months prior to
default. Bond ratings include split ratings. *Aggregate high yield
default rate data do include distressed exchanges.
Thought of the week: Source: J.P. Morgan Research, J.P. Morgan
Asset Management.

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Originally Posted August 31, 2026 – Weekly Market Recap

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