August 2024 Commentary
Market Overview
August 2024 was an unseasonably active month for the markets. On August 5, the Nikkei 225—Japan’s benchmark index—suffered a collapse of 12%, the largest single-session drop since Black Monday in 1987. This sent chills throughout global markets, with the S&P 500® dipping 3% on the same day, while the Dow Jones Industrial Average® fell 2.6%. The CBOE Volatility Index (VIX®) had its largest one-day spike in history at 65.7 intraday, closing at 38.57, 15.18 above its previous day close. The “culprit” was the “yen carry trade” triggered by Bank of Japan’s historic interest rate hike of 0.25%.
In the U.S., on August 2, the Bureau of Labor Statistics released the unemployment rate, which rose to 4.3%,1 while non-farm payrolls increased by only 114,000, a sharp slowdown from previous months. The second release from the Bureau of Economic Analysis confirmed that U.S. GDP increased at an annual rate of 3%2 in Q2 2024, while Q1 2024 GDP growth was revised from X% to 1.4%. The CPI rose by 0.2%3 on a seasonally adjusted basis, after a decline of 0.1% in June. Considering these statistics, the U.S. Federal Reserve is widely expected to make its first interest rate cut in September.
In other markets, a slowing economy triggered Mexico’s central bank to cut its interest rate by 25 bps in early August, bringing its key rate to 10.75%. Mexico’s GDP was revised down to 0.8%4 on an annualized basis; exports declined to 0.6% month-over-month; and inflation increased to 5.6%. In the eurozone, inflation decreased to 2.2%5 in August, down from 2.6% in July. India’s HSBC Manufacturing PMI is one of the key indicators of economic output for emerging markets; this month, it was 57.5,6 down from July’s reading, signaling an overall softness in economic growth.
