Record highs, bond benefits, volatility wanes: Market Takeaways

After the closing bell on Tuesday, August 12, Yahoo Finance Markets and Data Editor Jared Blikre shares his takeaways of the trading day, including stocks' positive reaction to July's consumer price index (CPI) report, the investor opportunity in the bond market, and falling volatility.

To watch more expert insights and analysis on the latest market action, check out more Asking for a Trend.

Video Transcript

00:00 Speaker A

Markets closing higher after digesting a key piece of inflation data. For more, we're bringing in Yahoo Finance markets and data editor, Jared Blikre. Jared, it was a record-setting day today on Wall Street.

00:11 Jared Blikre

Yes, it was. We got a really nice reaction right after that report. Stocks went up, and they really didn't look back. So my first takeaway is CPI for the risk market win here, and we'll take a look at some of the results. And first up is the NASDAQ composite. That is not even the strongest market of the day. That would be the Russell 2000 and some of the small cap indices, but here we have the year to date, and you can see nice pop here. This happened over the last few days. So looking good there. You take a look at the S&P 500, record right there. And here is the Russell 2000. I like this because it's just breaking out of this consolidation area. This is not a record high. It's not even close to the record highs. I got to show you, let's do a six-year chart, and you can see it's still underneath these highs that we had late last year. So a little bit of a work, some more work to do for the small caps, but nevertheless, a solid day in the indices. And you take a look at the sector action here, this is all green. We like to see this. We see the cyclical sectors, those are the ones that respond to the economy growing. So computer, uh, communication services, tech, materials, financials, you know, there's some gray area with the sectors, but mostly this is a cyclical driven rally today. And so I think that's pretty bullish for the most part. I did want to show you one more thing. I almost forgot about this. I prepared a little chart. This is the S&P 500 in white going all the way back to the beginning of the bull market. In green here, we have the CPI day reaction. So this is what the S&P 500 did on CPI days only. And we got that nice little bump up today, and we haven't had a bump up that big since over here. That was kind of the beginning of the year. So people have, why am I showing this chart? It's because people have been saying the jobs market is where the action is. Well, markets still care about CPI, and if markets and investors care about CPI, Ali, so do I.

02:52 Speaker A

So do I, too, Jared. But that's such a good point because we haven't really seen that reaction over the past few months. But clearly, that was evident today. And I love that you brought up small caps and how that is starting to climb out from those lows. And small caps are really a sensitive area.

03:11 Jared Blikre

The red-headed stepchild. Oh, you got a segue there. So let's not step all over that beautiful segue. We got to talk about bonds. Um, so bonds basically kind of smooth out the kinks. Did they do that in 2022 and 2023? No. But they also provide income for your portfolio, so that's something that we keep in mind as well, especially for older investors like me, who are approaching retirement in a few decades. a few decades.

03:49 Speaker A

Jared, you don't look a day over 20, come on now. But let's let's talk about volatility because that's something that we've been discussing as we gear up for Jackson Hole and some of these other moments that maybe do have a more volatile stock market.

04:04 Jared Blikre

Yeah, so when we talk volatility, we got to talk the VIX. And that, a lot of people call that the fear gauge for the market. That is kind of imprecise, but also it's almost there. So let me just show you a chart I prepared as well. The green line is what the VIX has done this year. And look at this big spike. Okay, that was the Liberation Day. We saw stocks dumped to the south side there. And when stocks go down, that's generally when the VIX is going up, so you don't want to see that. Now, in white, I have the average VIX price for every day of the year, going back to 1990. So this kind of provides a map for the rest of the year, well, the whole year, but we're interested in the future right now. So you will see that this generally trends up into the middle to the end of October. That is when we see a lot of historical market crashes in September and October. But volatility picks up right now in August. From then, it kind of dissipates into the year end. You get that Santa Claus rally. That's when you don't have almost any volatility. But right now is what we're concerned about. So if we do increase in volatility here, doesn't mean that stocks have to go down. It just means that the ride might get a little bumpier. So take that into consideration.

05:36 Speaker A

Right, and we've been hearing that from strategists that we could see a bit more chop in September and October. Jared, thank you so much. Appreciate it.

05:45 Jared Blikre

You're welcome. Related Videos

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