Markets were up slightly last week, but you would not know that by looking at volatility. Why did volatility remain elevated while markets stayed stable?
Mexico – US
On the 7th, Mexico and the US came to an agreement that resulted in Mexico avoiding tariffs on June 10th. Mexico will elevate their military presence at their southern border to curb illegal immigration through Mexico to the US. This deal was met with a strong positive response by the US Stock Markets on Monday. As the week wore on though, the tone got increasingly negative.
China – US
The trade dispute with China has taken a toll on both economies. US Consumer confidence fell in June to 97.9 from 100.0; China saw a slowing in industrial production last month. As economic data from both nations showed the toll of the trade dispute all week, optimism was dampened. Markets struggled to hold on to early gains.
The good news for the market is that dovish indications were given by the Federal Reserve Bank, European Central Bank, and the Bank of Japan. They all indicated that should economic activity slow further, they stand at the ready to stimulate the economy. They may stand at the ready, but the global economy has not deteriorated enough to make a rate hike this month likely.
While markets started the week strong, they faded through out the week. Remember that volatility is not the measure of down markets, but rather the measure of swings (up or down). Great volatility last week actually let to modestly improved market status. It is worth noting that the modest gains came as a result of weak economic data.. usually not a good sign for future gains.
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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment. Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.