Wall Street Reels From Painful August as Winning Trades Go Sour

The world’s most powerful central bankers have vowed in unison to keep interest rates higher for longer if necessary to tame inflation.

On Wall Street, that hawkish Jackson Hole message has been received loud and clear all month — fueling a $5.5 trillion stock selloff, a bond rout pushing yields to the highest in more than a decade, and more.

After rallying on bets that the Federal Reserve is on the cusp of easing policy, a slew of interest rate-sensitive investing strategies are taking a beating this August. Blame benign economic data that suggests the age of elevated borrowing costs will endure — and rich valuations across risky assets after a stunning first-half rally.

“There is a very strong likelihood risk assets have registered their highs for this year,” said Michael O’Rourke, chief market strategist at JonesTrading.

From buying meme stocks and dumping the dollar to betting against swings in stock prices, a slew of popular trades have become losers. Among the winners: Hedge funds betting that bond yields will rise anew.

Here is an overview of the trading action in charts.