Blog: Did August Market Volatility Mean Anything?
Was it "full of sound and fury, signifying nothing" or "Something wicked this way comes?"
While Shakespeare's lines for Macbeth were a pessimistic comment on the meaning of life, we have to wonder if, in a similar way, the market volatility of the last two weeks signified nothing. Was it just "sound and fury?" Or was it instead the second witch from the same play noting "Something wicked this way comes"?
Based on the Market Climatology model, we have a little of both. We entered those events with MUSI saying markets were in a Resilient state. This means that downside risk was relatively limited. And that turned out to be the case. In another example of Murphy's Law, I was on a short holiday when all the market activity hit. But by the time I returned the markets have recovered much of their losses.
So from a return standpoint, the record spike in the VIX and the fall and rebound in market prices was all meaningless sound and fury. But the fundamentals may have begun shifting so that the second witch's observation of something wicked may be more appropriate. Especially since the second witch always talks about the present (while the first addresses the past and the third, the future).