Analysts predict that there will be even greater volatility in the US stock market as it enters the historically more challenging period of August to September.
For most of 2024, US stock investors were celebrating a Goldilocks economy that was neither too hot nor too cold. However, a series of weak US economic data has raised concerns in the market about the possibility of a bear market. Product structure, operating income from 10-30 billion yuan products were 401/1288/60 million yuan respectively.
Ian Lyngen, the rate strategist at BMO Capital Markets, wrote in a report last Friday: "Even if you don't believe that the Federal Reserve will cut interest rates by 50 basis points in September, or cut interest rates by 25 basis points at each of the remaining three meetings this year, one thing is clear-Goldilocks has left the stage."
But will she be absent forever?
Some investors are skeptical that the market's reaction has been exaggerated. They believe that instead of the economy being out of control, it is just slowing down, and the previously overheated labor market is returning to normal.
Angelo Kourkafas, senior investment strategist at Edward Jones, said that while the market is experiencing a "growth scare", investors need to remember that the "landing" part of the so-called "soft landing" means that economic growth and employment will both slow down.
This does not mean that the bull market is likely to end soon, but Kourkafas said this will lead to a more volatile trading environment.
In fact, the Chicago Board Options Exchange Volatility Index (VIX), commonly known as the "fear index", rose to 29.66 points in trading on Friday, the highest level since March 2023, and closed at 23.39 points, slightly below its long-term average of just below 20.
Nicholas Colas, co-founder of DataTrek Research, said in a report last Friday that a "growth scare" usually accompanies a rise in volatility. This panic is a common feature of mid-term markets.
The shift in market narrative has been brewing. Some investors and strategists have previously warned that cracks are beginning to show in consumer spending, which will lay the foundation for a shift in market narrative from focusing on inflation to focusing on economic growth.
Analysts point out that the November US presidential election provides another source of uncertainty.
Meanwhile, the market will face a test on Monday, when the US will release the ISM July service index. Kourkafas said that the weak reading of the ISM manufacturing index last Thursday helped trigger the sell-off in US stocks, so investors will want to see whether the larger service sector has also been hit.
In addition, Kucakafas pointed out that due to concerns about the deterioration of the labor market intensified by last Friday's employment report, weekly initial and continued jobless claims data will also be closely watched. Of course, this month's financial report will also be crucial.$NVIDIA (NVDA.US)$The financial report later this month will also be crucial.
Keith Lerner, chief market strategist and joint chief investment officer at Truist, wrote in a report: "The bull market is still worth our confidence. However, we expect greater volatility in the market, which will continue as we enter the more challenging period of August to September in history."
He wrote:"Indeed, the market often takes two steps forward and one step back."
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