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August is usually volatile for the market, but the Fed is a wild card and could agitate things further

A trader works on the floor at the New York Stock Exchange (NYSE) in New York, August 20, 2021.

Andrew Kelly | Reuters

The markets: It’s August, but it’s also Covid. Normal August trading flows are being greatly complicated by the delta variant.

A third but still important complication — increasingly authoritarian action in China is causing some to reprice China’s demand for commodities, and the valuation of its entire market.

A normal August

On one level, this is a normal August: mostly low volume, followed by short bursts of downside volatility.

Many were alarmed when the Cboe Volatility Index (VIX) hit almost 25 on Thursday morning, but that’s only because volatility has been abnormally low, with only a few 1% daily moves in the S&P 500 in the last few months (way below the historic average, which is about one every week).

It’s typical for the VIX to spike at least once — and often several times — in August and September, and even into October. It was 25 at this time last year, and spiked into the 40s in October:

VIX: recent Aug-Oct. highs
2020 41
2019 24.8
2018 28