Despite S&P all-time highs, the VIX stubbornly holds above the 15 mark

Current market commentary

Many equity regions have continued to edge upwards recently, thanks to positive earnings revisions, ongoing inflows and share buyback programmes. The S&P 500 marked its 54th all-time high this year. Laggards such as US small caps and Japanese equities outperformed, supported by short covering and renewed economic optimism. Bond yields recently moved sideways, despite continued high inflation figures. The market is waiting for new indications from central banks regarding the curbing of bond purchase programmes. These are likely to be given at the central bank meetings scheduled for September. The fact that many investors are nervous and hedging can be seen in the persistent increase in implied volatility - with the VIX has never closed below 15 this year - and the high differential between hedging and upside participation costs. However, systematic investors as well as trend-following strategies have continued to buy stocks, making the market slightly more vulnerable overall.

Short-term outlook

Today, US stock markets are closed as a result of Labour Day. Following the recently more hawkish tones of some ECB members, the ECB meeting on September 09 should provide more clarity on future monetary policy in the euro zone. Politically, things will get exciting at the Eurogroup meeting on September 10/11 as well as the lower house elections in Russia on September 19. This Tuesday, ZEW economic expectations (Sep.) and industrial production data (Jul.) for Germany will be released. On Thursday, inflation data (Aug.) for China, exports (Jul.) from Germany and weekly initial jobless claims in the U.S. will follow. Industrial production data (Jul.) for the U.K., France and Italy and producer prices (Aug.) for the U.S. will be released on Friday. The following week, inflation data, consumer confidence, retail sales and U.S. industrial production data for August will be published.