The markets have been in a tizzy this week, starting off with a sudden dip on Monday followed by a relief rally and now ending the week almost where we began. Even though it dipped fast, it recovered almost as quickly. Here are some key points regarding the recent volatility.

Volatility: The market has gone up 60%–70% of the time by an average of 10% per year, but that return comes at a price, in the name of volatility. “It’s important to maintain a long-term perspective at times like this.” – Jurrien Timmer, Director of Global Macro for Fidelity Management & Research Company.

Unemployment in the U.S.: The job market is slowing; this is evident in the Job Openings and Labour Turnover Survey (JOLTS) report that was released last Friday. The unemployment rate is up 4.3% which helped put the market into a tailspin. Despite the job slow-down, this doesn’t mean we are heading into the long-feared recession, according to Timmer, this is more of an unwinding of COVID-era excesses rather than the start of a new downturn. 

Interest rates: The weak jobs report has now triggered anticipation for more rate cuts for this year and next. The market is now pricing in 3 rate cuts this year. A cut may even be as soon as September.  

Fixed Income: Bonds are currently offering protection against the recent volatility, at least for the moment. Bonds are zigging while equities are zagging.  

The dollar: The decline in yields caused the U.S. dollar to drop, proving that interest rate differentials are still important to currencies. The weaker dollar hints that this is not a liquidity event.

Earnings: Company earnings continue to improve, notwithstanding a few misses this week. Second quarter earnings growth is now up to 12%.

The S&P 500: Despite the recent volatility in the markets, the S&P 500 index remains in an upswing with the majority of stocks trading higher than their previous 200-day moving average. 

As we head into the fall, a seasonally more turbulent time, we must remember volatility is normal, stay diversified, stay invested, and know that this too shall pass. 

Have a great weekend, 

Tracey & Paige 

Source:

https://www.fidelity.com/learning-center/trading-investing/august-stock-market

Photo by Joshua Mayo on Unsplash

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