Last week, some investors and funds exposed their risk associated with leverage and currencies via carry trades. Some carry trade investors realized large losses, while most long-term prudent investors felt acute pain on Monday. Monday’s market volatility, measured by VIX, was the highest it had been seen since 2008. Fear of the systemic ripples from unwinding the carry trades contributed to Monday’s spike in the VIX premarket. The S&P 500 declined by only .02% for the week after upbeat PMI and Initial Jobless claims reports.
Unify Financial Advisors provides in-house portfolio management and analysis. We avoid outsourcing investment management to third-party advisors and mitigate hidden risks by knowing what you own. As a result, our clients did not have direct exposure to the carry trades that rattled the stock and bond markets last week.
This week, the world will digest US inflation data with July’s PPI and CPI reports to anticipate the Fed’s next move on interest rates. The market expects a 0.2% increase in July CPI. According to the CME FedWatch Tool, there’s currently a 100% probability the Fed will cut rates at least 0.25% at their September meeting, with a 47.5% probability of a 0.5% cut.
Feel welcome to contact me directly with with questions or comments.
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Regards,
David Bennett