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The month that was:
August had one of the scariest starts to a month in a long time, but it ended fine. For the whole month, the S&P 500 went up by about 2.3%, the Dow went up by about 1.8%, and the Nasdaq went up by about 0.6%.
On August 2nd, the jobs report showed that companies added only 114,000 jobs in July, much fewer than expected, and the unemployment rate rose to 4.3%. Investors worried that the economy was slowing down too fast. At the same time, the Bank of Japan raised its interest rates. For years, many investors had borrowed money in Japan, where interest rates were close to zero, and used it to buy stocks and bonds in other countries. This is called a carry trade. When Japan raised rates, those investors rushed to sell their investments to pay back their loans. On Monday, August 5th, Japan's stock market fell 12% in one day, its worst day since 1987, and the S&P 500 fell 3%.
That day, the VIX jumped above 65 for a short time. The VIX measures how much investors expect the S&P 500 to move up or down over the next month. When investors are calm, the VIX is usually between 12 and 20. When investors are scared, it goes up. That is why it is often called the "fear index." The last time the VIX went that high was in March 2020, at the start of the Covid pandemic.
But the panic didn't last. Over the next two weeks, the data showed that the economy was still doing okay, and the market recovered almost all of its losses. On August 23rd, Fed Chair Powell said at the Jackson Hole meeting that "the time has come" to cut interest rates, which made investors even more optimistic. August is a great example of why it is important not to panic. Investors who sold on August 5th sold at the bottom and missed the recovery.
Buys -
None.
Sells -
None.
I did not make any trades this month.
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