August 21, 2024: A Bad Dream, or More to Come?

The market’s recent days of volatility might feel today like the distant past. Last week, the S&P posted its strongest weekly performance since last November, pushing the index higher and only a touch from its all-time high. One would be forgiven for thinking that the carry-trade brouhaha of two weeks ago—fed both by fears of recession and loss of cheap leverage—was little more than a bad dream.

Investors found succor in three reports last week: a relatively benign report on inflation (CPI), a surprisingly strong report on retail sales, and an upbeat earnings release from retailing behemoth Walmart. Add a broad easing of financial conditions—lower oil prices, tighter credit spreads, falling mortgage rates, and a cheaper dollar—and the tone last week was decidedly more positive than the week prior.

So, was the early month volatility spike no more than a dream to forget? We suggest not.

The speed of both the market’s early month drawdown and its recovery suggests to us that the market’s newfound serenity may be fleeting. With the S&P 500 once again approaching its all-time high—and with crowded trades and recession anxieties still with us—investors be prepared for more volatile trading days ahead.

Weekly Market Update: August 21, 2024