September: On CNBC, they mentioned this is the worst start to September ever. As of 11:50 am, the S&P 500 has dropped almost six percent and the Russell 2000 has dropped almost eight. The volatility that began in August has continued. As of now, however, the August 9 low has held. The following chart shows the trailing volatility of the S&P 500 on a trailing 20-day basis. The recent episode, as expected, has shown the highest volatility since 2008-09. I was hoping to see the 1999-2003 data, but cannot readily retrieve it.
S&P 500 Trailing 20-day Volatility (Since 2002)
Gold: Gold quickly recovered from the $200 drop in late August and is now trading close to new highs. Obviously, Gold has been a safety trade as other asset classes have gyrated.
Gold (One Year)
Treasury Yields: The ten-year bond yield is now at the lowest level since the 1940s. As of 3:22 pm, it was yielding 1.96%, lower than it was during the crisis of 2008-09. The chart below shows the 10-year yield since 1980:
U.S. 10-Year Treasury Bond (Since 1980)
Swiss Franc: The Swiss Franc has experienced a very strong move up over the past year or so. The perceived safety of the currency has drawn investors out of riskier currencies like the Euro. In an aggressive move to stem the rise in Francs, the Swiss National bank declared it will peg the currency to the Euro at 1.20. "The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development," said the SNB in a statement. The SNB statement spurred an immediate move in the currency to about 1.2 Euros. One hope is that this will reduce some of the speculative interest in the currency. Today’s move in the Swiss Franc is the largest I could find. I wonder how this move affected currency traders who are often highly levered.
Euro vs. Swiss Franc (One Year)
Market Today: The market opened strongly lower mostly on European and banking fears. Throughout the day, the market slowly strengthened, closing down less than one percent. Volatility continues, with the indices showing roughly a three percent intraday range today. Within a weak tape, I did notice a few up stocks today, particularly in technology.
Have a good day! Brent
