The US economic data released in early August not only triggered a brief, but dramatic episode of financial-market volatility. It also fueled an abnormal degree of instability in forecasts by leading Wall Street economists, suggesting that they, like the Federal Reserve, may have lost their strategic bearings.
CAMBRIDGE – To the extent that financial historians ever refer back to August 2024, I suspect it will be for the craziness of the first three days of the month, when equity prices tumbled as investors’ dumped their darling stocks and sent the VIX (Wall Street’s “fear index”) soaring to levels not seen since the start of the COVID-19 pandemic in 2020. All this disorder will likely be attributed to the “bad technicals” associated with an over-leveraged Japanese yen “carry trade” and junior, inexperienced traders whose superiors were away on summer holidays.
CAMBRIDGE – To the extent that financial historians ever refer back to August 2024, I suspect it will be for the craziness of the first three days of the month, when equity prices tumbled as investors’ dumped their darling stocks and sent the VIX (Wall Street’s “fear index”) soaring to levels not seen since the start of the COVID-19 pandemic in 2020. All this disorder will likely be attributed to the “bad technicals” associated with an over-leveraged Japanese yen “carry trade” and junior, inexperienced traders whose superiors were away on summer holidays.