From gains to turmoil: July’s gains turn into August’s woes.
Panic selloff spiked volatility
Index volatility soared in the first three trading sessions in August, hitting an intraday high of 65. This in turn exacerbated market selloffs as it triggered the unwinding of “dispersion trades.”
Double digit growth in U.S. earnings in Q2
91% of the companies in the S&P 500 have reported earnings so far, and 78% are reporting EPS higher than estimates. Although the percentage of S&P 500 companies reporting positive earnings surprises is above average levels, the market’s high expectations are rewarding positive EPS surprises less than average and punishing negative EPS surprises more than average.
July rotation to small cap in historic proportions
One of this year’s laggards played catch up in July, as investors shifted towards small-cap equity stocks, which are more sensitive to interest rate cuts.
