Last Monday, markets around the world suffered from the fall of the Asian stock market, which caused the collapse of Wall Street.
A week of strong fluctuations in the markets has made investors wait for data from inflation, corporate earnings and presidential polls for signs that could ease a recent bout of turbulence in U.S. stocks.
After months of quiet trading, volatility in U.S. stocks increased this month as a series of alarming data coincided with the end of a massive yen-driven carry trade, sending stocks into their worst sell-off of the year. S&P 500 (.SPX), is 6% below the record high reached last month, even after regaining ground in a series of rallies following Monday’s crushing sell-off.
For many investors, what is at stake is the trajectory of the American economy. After months of betting on a soft landing, investors were quick to price in the risk of a more severe recession following weaker-than-expected jobs and manufacturing data last week.
“Everyone is worried about the economy,” said Bob Kalman, a portfolio manager at Miramar Capital. “We are moving away from the greed part of the agenda and now the market is faced with fears of significant geopolitical risks, a hotly contested election and volatility that is not going away.”
Waiting for calm
Although stocks have managed to rise in recent days, traders believe it will be a while before calm returns to the markets. markets. In fact, the historical behavior of the volatility index CBOE (.VIX)which posted its biggest daily jump in history on Monday, shows that volatility spikes typically take months to dissipate.
Known as the fear indicator of Wall StreetThe index measures demand for options to protect against market swings. When it closes above 35 — a high level it surpassed on Monday — the index has taken 170 sessions on average to return to 17.6, its long-term median and a level associated with much less extreme investor anxiety, a Reuters analysis showed.
A possible point of conflict will be on Wednesday, when USA releases its consumer price data. Signs that inflation is falling too sharply could reinforce fears that the economy is Federal Reserve has sent the economy into a tailspin by keeping interest rates high for too long, contributing to market turmoil.
For now, the markets Futures are pricing in a 55% chance that the central bank will cut benchmark interest rates by 50 basis points in September at its next policy meeting, compared with a roughly 5% chance seen a month ago.
Source: Ambito
