Ever felt like the stock market was on a rollercoaster that you just couldn’t get off?
On 5 August 2024, global conditions cumulated in what seemed to be the perfect storm for stock markets worldwide, and even the most seasoned investors held their breath.
Volatility levels spiked to pandemic levels last seen in March 2020.
But here’s the thing: what if I told you that this wild ride actually put some extra cash in my pocket?
Table of ContentsReasons For The Perfect Storm On 5 Aug 2024
Many experts have offered their views as to what caused the Black Monday of 2024, and the list is a really long one.
Economic concerns: Disappointing data on manufacturing and layoffs, along with lower-than-expected job creation numbers and a rising unemployment rate in July, triggered recession fears.Federal Reserve policy: There are worries that the Fed is waiting too long to ease interest rates, which are currently at 23-year highs.Currency market shifts: An unexpected rate hike from the Bank of Japan sparked the unwinding of the “carry trade” involving the Japanese yen.Corporate earnings: While many companies beat profit forecasts, fewer topped revenue estimates. Forecasts from some major tech companies have raised concerns.Geopolitical issues: Ongoing concerns about situations in the Middle East and Ukraine, as well as changing political dynamics in the U.S.High market valuations: The S&P 500 was trading at about 15% above its normal five-year level, making it vulnerable to a correction.Risk-off sentiment: A general shift in investor sentiment towards less risky assets.
Regardless of which of the above reasons contributed to the perfect storm, one thing is for sure.
Volatility spiked to levels not seen before since March 2020, and we all know what happened then.
CBOE Volatility Index (VIX) – What Does It Mean?
Below is my simple explanation of the VIX, which