Global equity markets finished mixed for the week. In the U.S., the S&P 500 Index closed the week at a level of 5344, representing a decrease of 0.02%, while the Russell Midcap Index moved 2.68% last week. Meanwhile, the Russell 2000 Index, a measure of the Nation’s smallest publicly traded firms, returned -1.32% over the week. As developed international equity performance and emerging markets were also mixed, returning -0.28% and 0.28%, respectively. Finally, the 10-year U.S. Treasury yield moved lower, closing the week at 3.94%.
Volatility was the main storyline across markets over the past week. The VIX index, “also known as the “Volatility Index” or the “Fear Gauge,” crossed a level of 60 for the first time since March 2020, sending rippling effects across markets and angst amongst investors. For reference, the VIX Index measures the market’s expectations of future volatility based on the prices of options on the S&P 500 Index. Specifically, it reflects the anticipated volatility over the next 30 days. A high VIX value indicates that investors expect significant price swings (i.e., high volatility), often due to uncertainty or fear in the market. Conversely, a low VIX value suggests that investors expect stable, low-volatility conditions. The VIX is widely considered to be an indicator of market sentiment and risk.
Despite the volatility at the beginning of the week, markets would ultimately rebound quickly as the odds of an interest rate cut by the Federal Reserve in September and additional cuts through year-end increased following weak employment data and slowing manufacturing. The vast moves in the market came as a surprise for many investors who have been accustomed to a low-volatility market environment so far in 2024. However, it would be prudent for market participants to expect higher volatility through the end of the year as global interest rates, elections, and ongoing geopolitical tensions remain headwinds. The inflation and jobs data that will be released this upcoming week may also further add fuel to the volatility fire.
Last week’s market activity stands as a reminder to investors to focus more on their time in the market rather than trying to time the market. Investors who panicked during the recent short sell-off would have completely missed out on the quick recovery in equities if they had tried timing the market’s volatility swing unsuccessfully. The events and activities that occurred during the past two weeks reiterate the importance of staying disciplined and working closely with financial professionals to ensure that investment portfolios are aligned with their long-term goals and tolerance for risk.
Best wishes for the week ahead!
Equity and Fixed income index returns sourced from Bloomberg on 8/9/24. VIX index data sourced from the CBOE on 8/9/24. Economic Calendar Data from Econoday as of 8/9/24. International developed markets are measured by the MSCI EAFE Index, emerging markets are measured by the MSCI EM Index, and U.S. Large Caps are defined by the S&P 500 Index. Sector performance is measured using the GICS methodology.
Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion and Walsh cannot guarantee the accuracy of said information and cannot be held liable. You cannot invest directly in an index. Diversification can help mitigate the risk and volatility in your portfolio but does not ensure a profit or guarantee against a loss.