“An investor who went on holiday at the end of July and returned at the end of August would have the impression that nothing had happened in the meantime. But those who follow market movements on a daily basis or who left with a week’s delay did not have the same holiday!”notes Kevin Thozet, member of the Carmignac investment committee.
In fact, the performance of the major global markets in August is far from reflecting the movements of a month marked by a mini-financial storm followed by a solid rebound. August thus ended with a 2.3% increase for the S&P 500 index on Wall Street, very close to its record and which brings its increase since the beginning of the year to 18.4%. In Paris, the CAC 40, which briefly fell below 7,100 points on August 6, has regained more than 500 points in less than four weeks and is once again posting a positive 2024 performance.
Quickly forgotten, therefore, was the storm of August 5, although spectacular: a 12% fall in the Tokyo Stock Exchange, followed by the worst session in almost two years on Wall Street and a surge in the Vix volatility index, nicknamed “the fear index”, to its highest since March 2020.
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The cause of this bout of weakness was the publication on August 2 of statistics on employment in the United States that were lower than expected. A disappointment that was combined with the massive unwinding of positions « carry trade »a very popular investment strategy in recent years, which consists of financing more profitable investments in other markets in yen to take advantage of the Bank of Japan’s near-zero rates. A winning scheme called into question by the announcement of a rise in Japanese rates on July 31.
But the trend quickly turned upwards, thanks to reassuring American economic indicators and especially to the speech by Jerome Powell, the president of the American Federal Reserve (Fed), at the meeting of central bankers in Jackson Hole, Wyoming.
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By stating that “the time has come” to influence monetary policy and that “Inflation is on a sustainable path back to 2%”the Fed boss clearly opened the way to a cut in interest rates, most likely as early as September 18 at the end of the next monetary policy meeting. A prospect that allowed Wall Street to set new records in the days that followed.
“We are coming out of the summer on a high, with a little less fear of inflation and a little more certainty that central banks are ready to lower rates.”summarizes Emmanuel Cau, head of European equity strategy at Barclays.
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