Recent Market Action
It is widely said that the market hates uncertainty. This time is no different. Last week’s Fed decision (or lack thereof) has added additional uncertainty to the market. While it may seem that keeping rates the same would be better for equities, it may be that raising rates on Thursday would have been good for the stock market because then at least market participants know what they are dealing with. The chart below shows that the S&P 500 is down 4.3% from its peak on Thursday, which was the day of the Fed release:
S&P 500 since Fed Release
Today’s decline has triggered renewed fears, causing many to wonder if the market will re-test or break the lows set in August, or worse, whether we are at the beginning of a new bear market.
VW
Volkswagen’s stock is down over 30% just in the past two days. Apparently, the company knowingly sold over 11 million vehicles with software specifically designed to evade government pollution tests. This is a shocker coming from a company known for its social and environmental responsibility. Back to the concept of the unknown I touched upon above, what the cost of this will be and how it will damage future VW sales is unknown. That unknown has caused the stock to plummet like never before. Interestingly, most of the other automakers gapped down today too.
Volkswagen
Home Sales
Most housing indicators remain strong. Yesterday, data was released for August existing home sales, which showed a slight decline. Interestingly, the reason given for the decline was that supply is so tight that people are having a hard time finding existing homes that they like and at the price they want. It has been a long time since this was the case. Here is a chart depicting months’ supply of existing homes. One can see that we are back to levels seen before the housing bubble began:
Existing Homes Sales Supply (In Months)
U.S. Dollar
There is a lot of talk about the strong and strengthening U.S. Dollar. Interestingly, and perhaps surprisingly to many, the Dollar has been range-bound all year:
