The past week on Wall Street was a rollercoaster ride for investors, with the S&P 500 experiencing its worst day in years on Monday, only to bounce back with an impressive rally on Thursday. Despite the extreme volatility, the market managed to close the week almost flat, leaving many investors wondering what the next move will be. The 10-year Treasury yield also saw significant fluctuations, dropping below 3.7% at one point before settling around the 4% level by the end of the week. The Cboe Volatility Index, known as the “fear gauge,” spiked to 65 on Monday but ended the week lower, indicating that the market may have stabilized for now.
While the surface-level fluctuations may have caused panic among investors, there were signs of underlying strength in the market. More than two-thirds of stocks in the S&P 500 were still trading above their 200-day moving average, a positive indicator for chart watchers. In the bond market, interest rate volatility did not seem to deter investors in high-quality corporate debt, as investment-grade spreads remained stable. Even in Japan, where there were significant swings in the local stock market and in the yen, signs of resilience were evident, with the Nikkei 225 Index finishing the week down less than 3% despite a drastic drop earlier in the week.
Despite the temporary stability in the market, there are concerns about the sustainability of the current bull market. Some analysts warn that the recent weakness in the market could lead to further declines in the coming weeks, especially with signs of fatigue in key drivers of the bull market. Issues such as the unwind of carry trades with the yen are still unresolved, and the looming U.S. election adds another layer of uncertainty to the mix. As the market enters a seasonally weak period, investors are bracing for potential renewed losses and sharp selloffs in the near future.
The trading action throughout the week was marked by unpredictability, with several weak closes in the final hours of trading raising concerns among investors. Even the counter rallies that occurred during the week drew suspicion from some analysts, who predict further short-term strength followed by renewed losses in the market. The recent volatility has highlighted the unpredictability of the market, leaving investors on edge about what the future holds.
The aftermath of a wild week on Wall Street has left investors in a state of uncertainty. While the market may have stabilized for now, underlying concerns about the sustainability of the current bull market persist. As the market navigates through a seasonally weak period and grapples with changing economic and political factors, investors will need to tread carefully and be prepared for further turbulence in the weeks ahead.