The summer session turned out to be extremely volatile with a two-sided trend. On the one hand, in July we saw a strong turnaround from the bad performance in June, with the financial markets showing a strong recovery. From the beginning of July until mid-August the main stock markets put up gains averaging more than 10% including a +18% of Nasdaq. Since mid-August, investors have had to face the harsh reality, and as a result stock markets have dropped nearly half of their gains. Investors are, once again, shaken by the fear of significant new restrictive measures by the major central banks. FED Chairman Powell, after the Jackson Hall symposium, reiterated that the U.S. central bank will continue to raise interest rates to bring inflation back to the 2% target regardless of the negative effects it might cause on economic growth. Same approach in Europe, where the ECB is expected to raise rates at its September meeting. In the old continent, uncertainty about the economy’s growth prospects remains even higher due to the continuing hostilities in Ukraine and the energy crisis. While the resumption of grain exports from Ukraine through the port of Odessa eased some of the pressure on food prices globally, Russia continued to limit its gas exports to Europe, which, together with the announcement of an unscheduled maintenance shutdown of the Nord Stream 1 pipeline, pushed average gas prices during the month to new all-time highs.

The performance of the major global indices in August was particularly disappointing compared to the previous month’s performance. In the United States, the S&P 500 index rose by 8% in July and fell by 4% in August. Same trend for the Nasdaq technology index with a +11.30% respectively a -4.50%. In Europe and Switzerland we also witnessed the same trend with Euro Stoxx 50 +7.50% respectively -5.10% and SMI +3.50% and -2.40%. For Asian markets well Japan +8% in July and +0.35% August. In trouble was the Chinese market (-6.22% and -2.60%) blamed for persistent difficulties in the real estate sector, continued lockdowns due to the COVID 19 pandemic and zero contagion policy, and an extraordinary event such as the strong heat wave and drought. These factors led to worse economic data causing weak domestic demand.

Dropping oil prices, since the beginning of July the WTI has lost 17.40 % from USD 108.43 to USD 89.55 at the end of August. In decline also the trend of the gold -5.50% from USD 1’811 to USD 1’710 per ounce. The dollar is constantly recovering both against the euro and against a basket of major currencies. The single currency has fallen below parity several times, and is down 12% since the beginning of the year.

As long as there is no easing of inflationary pressure, resulting in the end of the phase of less accommodative monetary policies, markets are likely to continue to experience periods of high volatility.