In August, the "bull market" on Wall Street is back, and so is the "gambling mindset".

US stocks staged a strong rebound in August, with the S&P 500 index hitting a new all-time high, and investors returning to the technology and leverage tracks.

Strong corporate earnings and cooling inflation jointly fueled the rally, but surging oil prices, high long-term Treasury yields and conflicting cross-asset signals are making this "golden age" trade increasingly fragile.

After chip stocks suffered a sharp sell-off in July, market fear came quickly and faded just as fast. The S&P 500 has risen by about 4% cumulatively so far this month, touching a level above the all-time high of 7,800 points this week; the Nasdaq 100 index, which briefly fell into a technical adjustment earlier, is now only 2.5% below its June peak.

This week, both Citigroup and JPMorgan Chase raised their 2026 year-end target for the S&P 500, underpinning the recent bullish sentiment.

Capital continues to pour in. According to State Street custody data tracking more than $50 trillion in institutional funds, institutional demand for US information technology stocks has rebounded to a five-year high in the past month.

At the same time, speculative tools such as leveraged ETFs and call options are regaining popularity, with both retail and institutional investors ramping up their risk exposure.

However, the rapid return of bullish bets has also raised alarms among some analysts — the "everything is good" combination currently priced in by the market leaves almost no room for error.

Earnings season acts as the engine, Citigroup and JPMorgan raise targets

The core driving force behind this round of rebound is an earnings season described by analysts as "incredible".

Q2 earnings of S&P 500 constituent stocks increased by more than 50% year-on-year, and the increase after excluding the investment income of Amazon and Alphabet is about 30%, which is still strong. Scott Chronert, head of US equity strategy at Citigroup, raised the year-end target to 8,100 points this week, saying "the magnitude of this level of earnings beat is something you rarely or never see".

Dubravko Lakos-Bujas, head of global market strategy at JPMorgan Chase, wrote in a client report that the US stock market's "earnings picture remains strong and widely distributed across sectors", and the performance of some hyperscale cloud computing enterprises shows early signs that their huge AI investments are beginning to generate returns.

The bank raised the S&P 500 year-end target from 7,800 points to 8,000 points, implying that the index will rise by 16.5% for the whole year.

Kevin Gordon, head of macro research and strategy at Charles Schwab, said, "To the extent that the technology sector can move the needle on the index, this is the new normal."

Nevertheless, analysts also noted that earnings growth is spreading to other sectors of the economy, which is seen as a healthy sign for the continuation of the bull market.

Chip and leverage tracks both rebound strongly

The sectors that took the lead in the rebound are exactly the ones that fell the hardest in July.

Super Micro Computer has risen by about 38% cumulatively so far in August, memory company Sandisk is up more than 33%, cloud computing enterprises CoreWeave and Nebius have each risen by more than 40% in the past two weeks; Micron and Intel are also up about 15% respectively.

The leveraged ETF market has also seen a sharp resurgence of "betting appetite".

According to Bloomberg Intelligence data, since the beginning of this year, leveraged index funds have created a total of nearly $500 billion in wealth, while single-stock leveraged funds have evaporated about $4 billion over the same period. This stark contrast reveals a harsh reality: broad-based leverage strategies betting on sustained rebounds have outperformed, while strategies that tried to amplify the gains of individual hot stocks have been hit hard.

James Seyffart, ETF analyst at Bloomberg Intelligence, pointed out:

"Single-stock products have higher risks and volatility, and investors are more likely to get burned. But this field is so new, new products are being launched almost every day, and people just keep buying."

Among the most popular products, the $250 billion Direxion Daily Semiconductor Bull 3X ETF has attracted the largest capital inflows despite falling by about 20% in the past month; the Direxion Daily TSLA Bull 2X ETF also ranks at the forefront in terms of inflows despite losing more than 50% of its value this year.

Adam Phillips, director of investment at EP Wealth Advisors, said, Retail investors have recently shown the characteristic of "disciplined buying" amid volatility, and "to some extent, they have become smart money".

Cooling inflation compresses rate hike expectations, the dollar weakens

What adds macro fuel to this round of rebound is a series of lower-than-expected inflation data.

US CPI rose by about 3.4% year-on-year in July, and core inflation continued to fall; PPI in July was flat month-on-month, below expectations; retail sales in July fell by 0.6% month-on-month, the largest decline in more than a year. These data prompted traders to sharply cut their bets on further interest rate hikes by the Federal Reserve, and the probability of a rate hike in September plummeted from 75% at the end of July to about 25%.

The dollar index then fell back to a three-month low, erasing all the gains brought by the hawkish path since Fed Chairman Walsh took office.

Michael Metcalfe, head of macro strategy at State Street, believes that the US technology trade "is bulletproof, at least for now" — "Amid geopolitical and economic noise, earnings remain so strong, which reinforces the judgment that this is a structural trade, not a cyclical one."

Derivatives market sees return of bullishness, hedging demand falls to one-year low

The movements in the options market also confirm the shift in sentiment.

According to Cboe data, the SKEW index of the S&P 500 — which measures the difference between the cost of hedging downside risk and the cost of call options — fell to a one-year low in early August.

Mandy Xu, head of derivatives market intelligence at Cboe, said investors "sold off hedging tools and chased call options to ride the rebound".

At the same time, the VIX fear index has fallen for the fourth consecutive week, even as oil prices surge, tensions in Iran persist, and long-dated Treasury yields remain at high levels.

This sends a clear signal: The market believes that almost every piece of negative news comes with its own bullish hedge — weak employment means the Fed will not raise rates, slowing consumption means the Fed will not raise rates, rising oil prices are seen as temporary, and AI earnings are strong enough to override everything.

Multiple conflicting signals emerge, the "Goldilocks" narrative faces tests

However, the gap between asset prices is widening and cannot be ignored.

Oil prices surged by about 6% this week, with Brent crude approaching $90 per barrel, mainly due to stalled negotiations over the Strait of Hormuz and US threats to escalate sanctions.

At the same time, this week's 30-year US Treasury auction cleared at the highest yield in 25 years, and the 10-year auction yield is also at a historically high level; although short-term interest rates fell amid fading Fed rate hike expectations, long-term rates continued to rise, pushing the term premium to a high level, and the yield curve steepened significantly.

This means: the market may believe that the Fed has basically finished raising interest rates, but does not believe that inflation is over.

Henry Allen, macro strategist at Deutsche Bank, warned that "the market is currently pricing in a golden age combination: growth remains strong, central bank rate hikes are limited, supply shocks prove to be temporary, and oil prices fall again." He said, "This leaves almost no room for error. It is hard to imagine that all these completely benign conditions can hold at the same time."

Michael Contopoulos, head of multi-asset macro investing at Janus Henderson Investors, also said that while the strong fundamentals make it reasonable to be overweight on stocks, "chasing crowded and expensive market areas is a huge risk, and we will avoid it."

At present, a game between the "Goldilocks" narrative and Treasury bears is taking shape. The stock market is betting on a soft landing and an AI earnings super cycle, while the long end of the bond market is pricing in fiscal deficits and supply pressures. The two cannot be correct at the same time. Which side will win in the end may become the most important market theme in the second half of 2026.

This article does not constitute personal investment advice, does not represent the views of the platform. The market is risky, and investment requires caution. Please make independent judgments and decisions.

This article is from the WeChat official account "Wall Street CN", author: Zhang Yaqi, published with authorization from 36Kr.