July Market Analysis: Potential Recession Alarm Bell Rings Again
In the world of investments, the focus has shifted towards growth-related macro data rather than inflation risks. A softer US retail sales report could spark fears of another recession, also known as a hard landing scenario. The rise of the VVIX/VIX ratio indicates a potential spike in volatility, while the Nasdaq 100 faces a key resistance level at 19,230.
The Nasdaq 100 was the worst-performing benchmark US stock index in July, recording a monthly loss of -1.6%. The global risk-off behavior led to a larger drawdown in the Nasdaq 100 compared to other indices, dropping by -16% from its July high to August 5th low. However, a recent decline in implied volatility has boosted risk appetite, with the Nasdaq 100 rebounding by 9% from its low.
Despite a soft July US inflation print, the market is now more concerned about economic growth data and the fear of a recession. The upcoming US retail sales report for July will be crucial, as a fourth consecutive month of slowing consumer spending could reignite recession fears.
The VVIX/VIX ratio has been increasing, indicating uncertainty in the US stock market. Another spike in volatility cannot be ruled out. Technical analysis shows that the Nasdaq 100’s short-term bullish momentum is waning, with a key resistance level to watch at 19,230.
In conclusion, investors should monitor the upcoming US retail sales report and keep an eye on the VVIX/VIX ratio for signs of increased volatility. The Nasdaq 100’s performance at the 19,230 resistance level will be crucial in determining the market’s next move. Stay informed and be prepared for potential market shifts in the coming weeks.