Disappointment at Jackson Hole
Volatility in the global markets fell considerably in the previous week. The key risks subsided that spiked risk aversion in the last few weeks. Geopolitical tensions involving North Korea no longer made headlines and political uncertainty in the US seems to have been accepted by the markets. At the Jackson Hole symposium, Fed Chair Janet Yellen and ECB President Mario Draghi stuck to the discussion topic. They made sure that there weren’t any surprises for the markets. A lack of any surprises led to a fall in risk aversion. Most of the global indices closed the week on a positive note.
US market performance
In the US, markets turned positive in the week ending August 25 after posting two consecutive weekly losses. The S&P 500 Index (SPY) rose 0.72% for the week and closed at 2443.05. The Dow Jones Industrial Average Index (DOD) rose 0.64%, while the NASDAQ (QQQ) closed 0.79% higher for the week ending August 25. Bond markets (BND) turned positive as fears of aggressive monetary tightening from the US and Europe receded. The US dollar (UUP) continued depreciating against the majors. Last week’s developments strengthened the view of no more rate hikes.
VIX index fell 20% last week
The VIX Index (VXX) rose more than 50% in the second week of August amid rising geopolitical tension and US political tension. VXX gave up most of its gains last week. The VIX Index (UVXY) closed at 11.28 for the week ending August 25—compared to its close of 14.26 the previous week. Another fall in volatility can be expected this week as we start the last week of summer. There aren’t any major economic events scheduled.
According to the latest “Commitment of Traders” report released by the Commodity Futures Trading Commission, large speculators have decreased their overall net short positions to 105,294 contracts from 129,406 contracts through August 22.
In this series, we’ll analyze how different asset classes performed in the previous week. We’ll discuss the outlook for these asset classes.