Less than a month ago the CBOE volatility index – known as the best indicator of fear in the markets – dropped to a record low of below 9. The declines were a result of steady equity markets, low trading volumes, and optimism that the markets were heading higher. This has all changed in the past two weeks, with the fear index rallying from a low of 9.52 to 17.28 – an 81% spike in 4 days from Aug 8 to Aug 11.
No, not the sustained collaboration Troika between the European Commission (EC), European Central Bank (ECB) and the International Monetary Fund (IMF) that is overseeing the Greek Debt Bailout. While we feel the Greek Debt Bailout situation is still festering in the background on the IMF actually only funding its commitment once the European creditor nations agree much more extensive Greek debt relief, that is not the ‘troika’ of the moment.
Thursday saw U.S. stocks suffer one of their worst sessions so far this year. The benchmark S&P 500 index closed 1.5% lower to represent its biggest one-day drop since May. The sell-off continued in Asia overnight and there was some follow-through in Europe this morning. U.S. index futures have drifted further lower on follow-up technical selling momentum as more bullish speculators have been forced to liquidate their positions.
The U.S. dollar remained on the defensive early Thursday, after yesterday’s declines led by increased uncertainty over another U.S. rate hike in 2017 and President Donald Trump’s fiscal agenda after abolishing the Manufacturing Council and Strategy & Policy Forum.
There is nothing like the thought of your friendly neighborhood unstable dictator happily cheering along his newly confirmed intercontinental ballistic missiles (ICBMs) and miniaturized nuclear weapons to give the markets pause. And of course, we say ‘neighborhood’ in the sense that media genius Marshall McLuhan noted back in the 1960’s that the new high-speed video communications had turned the entire planet into a ‘global village’.
On June 1, the day that President Donald Trump withdrew the United States from the Paris Agreement, everyone from CNN panelists to the local bartender self-appointed themselves as experts on environmental economics and international climate policy.
Financial markets are set to open on a more downbeat note on Friday, with earnings from Amazon on Thursday being blamed for the initial underperformance along with the U.S. Senate’s inability to pass the “skinny repeal” of Obamacare.