FIRE and ice
While foreign markets struggled amid growth fears stemming from a regulatory crackdown on Chinese tech companies, US markets looked past rising inflation and continued higher in July, with the S&P 500 +2.38% and the Nasdaq 100 +2.78% on the month.
US / foreign equity index divergence. Growth of $100, 6/1/21 - 7/31/21
Despite equity markets near all time highs, the VIX index bounced around just below the crisis zone for much of the month, neither high nor low with no decisive moves in either direction. Smart Index strategies (Tactial Beta / US Equity Smart Index +2.1% July, Tactical Q / Smart Tech +2.7% July) opted to play defense with modestly reduced index exposure, while Alpha Seeker (+1.0% July) took advantage of the back and forth with a combination of long S&P exposure and small VIX trades in both directions.
Presently, VIX prices remain mostly higher than would normally be expected for a quiet equity market near all-time highs. So far, this has just been been another “wall of worry” for stocks to climb, but with the historically turbulent fall season and the Fed’s Jackson Hole symposium approaching, a change could be in store. As always, we will continue to watch the VIX marketplace for signs of an acute crisis and respond accordingly.