August in review

August was a volatile month, with Wall Street’s ‘fear index’ (CBOE Volatility Index) recording its biggest one-day spike in history. The turbulent start to the month was punctuated by heavy selling in equity markets, which peaked in the first five days, following a surprise spike in US unemployment and a resurfacing of the ‘R’ word (recession) on trading floors. This coincided with an unusually aggressive policy stance by the Bank of Japan (BoJ) on 31 July, which saw the unwind in the yen carry trade reverberate across global markets. These market jitters would, however, later be alleviated, while dovish rhetoric from the US Federal Reserve (Fed) and the BoJ brought more calm to capital markets. The final weeks of the month saw equities pare back most of the losses suffered earlier in the month, as investors bought the dip following a near 9% drawdown from July peaks. A slew of positive US economic data and a strong second-quarter earnings season provided additional tailwinds for the relief rally. Growing enthusiasm for rate cuts continued to fan the rotation into small caps during the month. Regionally, the US led performance while China and Japan struggled.

Source: Bloomberg, for the month ending 31 August 2024.