Summer Volmageddon
August has now ended with the US markets at their highest levels ever after a circa 2% rise for the month, US inflation figures published in mid-August are back below 3%, the September rate cut now seems to be on track, and Jerome Powell’s Jackson Hall symposium reassured the last worriers. For someone who left on holiday at the end of July without worrying about stock market news, August was an uneventful and fairly good month. A colleague, who left on holiday a week later, experienced a different story and will not remember this summer month as a leisurely stroll down memory lane. In early August, markets reacted with unprecedented violence: the Nikkei lost 12% in a single session, and in the hours that followed - on Monday August 5 – the VIX index measuring the S&P500 implied volatility soared above 50 before ending at 38. At month-end, the VIX index was at 17 and everything seems to be back to normal, although a number of questions remain unanswered with regards unwinding of JPY carry-trade operations, the US inflation trajectory and recession prospects. We are addressing these topics and developing our opinion in greater detail in this newsletter.
