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KBWB may benefit if a steeper yield curve boosts bank profitability.
MAGS offers AI exposure as Big Tech keeps spending aggressively.
JPST can provide stability, while VYM adds defensive dividend income.
Wall Street delivered mixed performance in July. The Dow notched its fourth straight monthly gain, while the S&P 500 finished little changed and the Nasdaq fell as investors rotated away from high-growth technology stocks amid surging Treasury yields.
The tech-heavy Nasdaq-100 declined 3.6% for the month (as of July 31, 2026), while the VanEck Semiconductor ETF (SMH - Free Report) tumbled nearly 17%, marking its worst monthly performance since the 2008 financial crisis.
Markets also grappled with renewed inflation concerns as geopolitical tensions disrupted traffic through the Strait of Hormuz, lifting oil prices sharply. This is the backdrop against which Wall Street enters August trading.
Below, we highlight a few exchange-traded funds (ETFs) that could gain in August if the global economic backdrop and market sentiment remain largely unchanged.
The yield on the U.S. 10-year Treasury bond closed July at 4.75%, its highest level since January 2025, as the yield curve continued to steepen following comments from Fed Chairman Kevin Warsh implying that the central bank may allow the market to handle inflation, as quoted on Yahoo Finance. The longer-date 30-year Treasury rose to the bond's highest level since June 2007.
At the time of writing, traders priced in a 65% probability that the Fed will enact a 25-basis-point hike at the September meeting, with 87% odds that the target rate will be a quarter point higher by the end of the year, according to CME data, as quoted by Yahoo Finance.
The scenario strengthens the case for investing in financial ETFs, as the sector tends to perform well in a steeper yield curve environment.
Although higher interest rates in the United States have raised concerns that elevated borrowing costs could weigh on equity valuations and hurt high-growth sectors like technology, July's earnings season put Big Tech AI stocks in a favorable position. July earnings made it clear that, regardless of the macro backdrop, Big Tech remains steadfast in its commitment to heavy AI capital spending.
Strong earnings from Amazon (AMZN) and Microsoft (MSFT) reassured investors that AI investment remains robust. Together with Meta (down 9.2% past month) and Alphabet (down 0.4% past month), the hyperscalers now expect to spend $720-$745 billion on capital projects in 2026, easing concerns over an AI spending slowdown, per CNBC. Recent tech selloffs helped the space correct some rich valuations.
The JPMorgan Ultra-Short Income ETF seeks to achieve its investment objective by primarily investing in investment grade, U.S. dollar denominated short-term fixed, variable and floating rate debt. The fund charges 18 bps in fees and yields 4.22% annually (read: Short-Term Bond ETFs Getting Investors' Love: Here's Why).
Since these ETFs have very low duration, these are less susceptible to rising rate worries. Cash and short-dated fixed income may play a greater role in providing stabilization in a portfolio. Yields on short-term U.S. Treasury bills are almost in line with the U.S. inflation, which is a positive factor.
Value – Vanguard High Dividend Yield Index Fund ETF (VYM - Free Report)
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4 ETFs to Play in the Month of August
Key Takeaways
Wall Street delivered mixed performance in July. The Dow notched its fourth straight monthly gain, while the S&P 500 finished little changed and the Nasdaq fell as investors rotated away from high-growth technology stocks amid surging Treasury yields.
The tech-heavy Nasdaq-100 declined 3.6% for the month (as of July 31, 2026), while the VanEck Semiconductor ETF (SMH - Free Report) tumbled nearly 17%, marking its worst monthly performance since the 2008 financial crisis.
Markets also grappled with renewed inflation concerns as geopolitical tensions disrupted traffic through the Strait of Hormuz, lifting oil prices sharply. This is the backdrop against which Wall Street enters August trading.
Below, we highlight a few exchange-traded funds (ETFs) that could gain in August if the global economic backdrop and market sentiment remain largely unchanged.
ETFs in Focus
Financials – Invesco KBW Bank ETF (KBWB - Free Report)
The yield on the U.S. 10-year Treasury bond closed July at 4.75%, its highest level since January 2025, as the yield curve continued to steepen following comments from Fed Chairman Kevin Warsh implying that the central bank may allow the market to handle inflation, as quoted on Yahoo Finance. The longer-date 30-year Treasury rose to the bond's highest level since June 2007.
At the time of writing, traders priced in a 65% probability that the Fed will enact a 25-basis-point hike at the September meeting, with 87% odds that the target rate will be a quarter point higher by the end of the year, according to CME data, as quoted by Yahoo Finance.
The scenario strengthens the case for investing in financial ETFs, as the sector tends to perform well in a steeper yield curve environment.
Tech – Roundhill Magnificent Seven ETF (MAGS - Free Report)
Although higher interest rates in the United States have raised concerns that elevated borrowing costs could weigh on equity valuations and hurt high-growth sectors like technology, July's earnings season put Big Tech AI stocks in a favorable position. July earnings made it clear that, regardless of the macro backdrop, Big Tech remains steadfast in its commitment to heavy AI capital spending.
Strong earnings from Amazon (AMZN) and Microsoft (MSFT) reassured investors that AI investment remains robust. Together with Meta (down 9.2% past month) and Alphabet (down 0.4% past month), the hyperscalers now expect to spend $720-$745 billion on capital projects in 2026, easing concerns over an AI spending slowdown, per CNBC. Recent tech selloffs helped the space correct some rich valuations.
Cash-Like ETF – JPMorgan Ultra-Short Income ETF (JPST - Free Report)
The JPMorgan Ultra-Short Income ETF seeks to achieve its investment objective by primarily investing in investment grade, U.S. dollar denominated short-term fixed, variable and floating rate debt. The fund charges 18 bps in fees and yields 4.22% annually (read: Short-Term Bond ETFs Getting Investors' Love: Here's Why).
Since these ETFs have very low duration, these are less susceptible to rising rate worries. Cash and short-dated fixed income may play a greater role in providing stabilization in a portfolio. Yields on short-term U.S. Treasury bills are almost in line with the U.S. inflation, which is a positive factor.
Value – Vanguard High Dividend Yield Index Fund ETF (VYM - Free Report)
Value ETFs outperform in a higher-rate environment. The VYM ETF yields about 2.24% annually while charging only 4 bps in fees (read: Worried About Overvaluation? Seek Safety in Low-Volatility ETFs).