Volatility Returns

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

It has been two years since the markets have seen much volatility.  Though the Fed signaled a rate cut in September last week, markets responded negatively on Thursday & Friday as fears that the Fed is behind the curve surfaced.  So far, 75% of S&P 500 companies have reported 2nd quarter earnings and 78% have beat expectations, which is above the 5-year average.  Despite positive earnings from most companies, declining inflation, and solid consumer spending, the market believes that the Fed has waited too late to lower interest rates.  At Wednesday’s FOMC meeting, the Fed left interest rates unchanged, but signaled a rate cut at its next meeting on September 18th.  The market received the news with open arms as equities rose more than 1%.

However, markets began to sell off on Thursday as fears of a coming recession increased and deleveraging overseas picked up pace.  A weaker than expected labor report on Friday showed only 114,000 jobs were added versus 176,000 expected.  The futures on the Fed Funds rate now show a 98% probability of a 50 basis point rate cut at the Fed’s next meeting—versus only a 5% probability just one month ago.  Now, some analysts are expecting an inter-meeting rate cut possibility.  Expect more volatility as markets grapple with recession fears and Fed speakers during the week.

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Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

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