Key points:

  • The US stock market is experiencing a period of heightened volatility.
  • Investors are anxiously awaiting new data to understand the reasons for the fluctuations and forecast the future of the market.
  • The VIX volatility index has reached record levels, indicating high levels of investor anxiety.

Investors are anxiously awaiting inflation data, corporate earnings results and presidential poll results, hoping that these figures will shed light on the reasons for the recent heightened volatility in the U.S. stock market, and are looking for factors that could stabilize the situation.

What happened last week?

After a long period of relatively quiet trading, the U.S. stock market has seen a sharp increase in volatility this month. The confluence of a series of negative economic indicators and the end of a major yen rally that had fueled the market triggered the biggest sell-off in stocks this year. Despite a partial recovery from the previous week’s plunge, the S&P 500 is still about 6% below its all-time high reached last month.

The key question for investors now is the trajectory of the U.S. economy. After a long period of expectation of a soft landing, investors are increasingly considering the possibility of a deeper economic downturn, especially in the wake of weaker-than-expected manufacturing and employment data released last week.

While the stock market has been on a positive path in recent days, market participants believe that it will take a long time to regain stability. Historical data from the Cboe Volatility Index (.VIX), which posted its largest one-day gain on Monday, supports this assumption. Periods of heightened volatility typically have long recovery times.

Known as Wall Street’s “fear gauge,” the Cboe Volatility Index (.VIX) measures demand for options that offer protection against market swings. When the index exceeds 35, as it did on Monday, it takes about 170 trading sessions on average to return to its long-term median of 17.6, which represents a much lower level of investor anxiety.

The presidential race will increasingly influence the market

The week ahead promises to be a busy one for investors, with a number of major companies including Walmart and Home Depot set to report their financial results. The results will provide insight into the current state of the U.S. consumer market amid a prolonged period of rising interest rates.

Also expected later in the month is Nvidia, whose stock has seen significant gains this year. Meanwhile, the Federal Reserve’s annual Jackson Hole Symposium, scheduled for August 22-24, will give market participants a chance to take a deeper dive into the regulator’s monetary policy before its September meeting.

Analysts view the recent market volatility as a healthy correction in the ongoing bullish trend and have decided to increase their position in Amazon.com, taking advantage of the recent decline in its stock price.

The political situation in the US is also adding to the overall picture of uncertainty. According to the latest opinion polls, Vice President Kamala Harris has a slight lead over former President Donald Trump ahead of the presidential election. However, given the dynamic political situation, investors are expecting more unplanned developments in the run-up to the election.