The tourist-tempting website for Jackson Hole, Wyoming, boasts that the local mountain terrain “inspires rugged activity and creativity.”
“With myriad outdoor and indoor diversions, this small town has a big cultural footprint,” reads the “Things to Do” section of the site.
It’s hard to disagree with the marketing copy when it comes to central banking, one of those myriad indoor diversions that happens every August in Jackson Hole. While Janet Yellen and Mario Draghi were not as creative as Ben Bernanke was in past Augusts in Jackson Hole, their indoor activities this year sure did inspire some rugged action with a big footprint in financial markets.
Here are the highlights of the market month that was for discussion around the barbecue pits this weekend:
*Things were looking pretty grim for the stock market as August started, with the Standard & Poor’s 500 Index on its way to a mini-correction of 3.9 percent. It found its footing on Aug. 7, however, and was at a new record by Aug. 21 as central bankers began their indoor diversions. The benchmark index or its algorithmic overlords seemed to mock those of us obsessed with round numbers, closing at 2,000 on the nose for two straight days before going, “nah, just kidding” and dipping back below.
The S&P 500 is poised for a 3.6 percent advance this month, its best performance in August since 2000.
*The VIX almost disappeared again. The Chicago Board Options Exchange Volatility Index is down 29 percent in August, the biggest monthly drop in more than two years, and is about three points from a record low. U.S. stock trading volume slowed to a trickle. By the end of August it was the lowest since at least 2008, excluding the end of December, with a daily average of 4.4 billion shares changing hands.
*The value of equities globally reached a record of almost $66.2 trillion on Aug. 27. The Stoxx Europe 600 Index rallied 1.6 percent, snapping a two-month retreat. The MSCI Asia-Pacific Index slipped 0.6 percent after surging 8.4 percent in the previous three months.
*Sovereign debt yields slid to record lows throughout Europe as Draghi’s Jackson Hole speech fueled speculation that the ECB may embark on a bond-purchase program to stimulate the economy. Spain’s 10-year yield went as low as 2.08 percent, Italy’s touched 2.34 percent and Germany’s was sitting under 0.9 percent.
*Treasuries rallied too, sending 30-year rates to a 15-month low of 3.06 percent. Global fixed-income securities of all types gained 1.23 percent in August, the most since January as measured by Bank of America Merrill Lynch index data.
*The dollar gained. The euro and yen weakened. The ruble sank 3.6 percent versus the dollar and reached a record low as a bunch of Russian soldiers decided to vacation in Ukraine. The shekel lost 4 percent versus the dollar and touched the lowest of the year as the Bank of Israel unexpectedly cut its benchmark interest rate for a second straight month.
*In commodities, wheat was the big story amid concern those Russian soldiers’ vacation plans will hurt supplies. The most-active wheat contract surged 6.2 percent in August after tumbling 27 percent in the previous three months. Soybeans were the biggest loser, dropping 5.6 percent for a fourth straight monthly decline on prospects for a record U.S. crop.
*And last but not least: bacon! Wholesale pork bellies sank 25 percent to 99.19 cents a pound this month after a similar decline in July on signs the spread of a deadly pig virus has slowed.
So, in summary, August looks like this: Stocks were up. Bonds were up. The dollar was up. And bacon was down, at least while those Russian soldiers were on vacation. They eat it raw over there, on rye with a dash of garlic. And it sounds like those guys are building up quite an appetite while on holiday.