September 14th, 2015
August is traditionally a thin month on stock markets in the Northern hemisphere. The second-in-charge managers are left to run the show and trading volume normally drops: nobody wants to take big positions when it may be difficult to unwind. In 2015 there is also the spectre of a major interest rate decision a few weeks into September.
August 2015 started flat. Indeed 2015 as a whole had mostly been quiet in the US and UK markets. The Standard & Poors 500 epitomised the monotony: until the mid-August China crisis the index had spent 2015 in a range no more than 3.5% either side of its January starting level (largely between 2,000 and 2,100). In the UK, until mid-August the FTSE 100 had spent much of the year churning between 6,500 (it opened at 6,566) and 7,000.
The events of August moved both markets into correction territory (a fall of more than 10% from the previous high), although the S&P 500 ended the month only 7.4% below the all-time peak it set in May. Other markets were harder hit: A report in the FT said that 40% of world markets tracked by Absolute Strategy Research were in bear market territory (a fall of over 20%). The table below helps put the events of the month into more perspective.
|Index||31/12/2014||31/8/2015||August Change||Year to date Change|
|Euro Stoxx 50||3146.43||3269.63||-9.19%||3.92%|
The volatility of August will potentially be replaced by the September variety. The key date to watch is Thursday 17 September, when the Federal Reserve finishes its rate setting meeting and we will learn whether US rates are going up for the first time since June 2006.