Market on edge: navigating market turmoil and rising volatility
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Koen Hoorelbeke
Optiestrateeg
Samenvatting: Amidst rising volatility, especially during this U.S. election year, diversified portfolios - spreading risk across asset classes like fixed income, commodities, and foreign currencies - are showing greater resilience and profitability, offering a crucial defense against market uncertainty.
Diversification in action: navigating market turmoil and rising volatility
September 3, 2024, served as a stark reminder of the volatility we’re facing in the markets. While Wall Street remained closed for Labor Day on Monday, futures pointed toward a volatile trading session on Tuesday, reflecting the uncertainty ahead. Contributing to this unease was the ISM Manufacturing PMI, which came in less favorable than expected, signaling weaker growth in the manufacturing sector. Later in the day, further market jitters were sparked by reports that Nvidia had received a US Justice Department subpoena. However, it now appears that this news may be unfounded, adding confusion to an already volatile trading environment.
Amidst this market upheaval, volatility is climbing, as seen in the VIX seasonality chart, which shows a historical rise in the second half of the year. What’s particularly noteworthy in 2024 is how volatility has risen above historical averages beginning September, after a relatively calm first half.
As volatility rises, so does the risk to your portfolio. While you can’t control market volatility, you can manage the volatility of your portfolio. This is where diversification comes into play.
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