Politics is among key catalysts driving higher volatility within the current bull trend, Evercore ISI analysts noted Tuesday.
The report suggests that the volatility spikes seen in 2024, such as the “Supervol Spike” on August 5, which sent the VIX Index to its fourth-highest level ever, are not isolated incidents but are closely tied to political developments and uncertainties.
The spike was averted by a narrative that the Federal Reserve is prepared to do “whatever it takes.” According to Evercore, this narrative will be implied by Fed Chair Jerome Powell at the upcoming Jackson Hole conference, “seeking to pilot the economy to a ‘Soft Landing’.”
In addition, the upcoming events such as Vice President Harris’s speech at the Democratic National Convention (DNC), at least one presidential debate, and the approaching U.S. election on November 5 could also inject volatility into the markets.
Analysts question whether Harris’s speech at the DNC will be a “rally killer” such as Trump’s acceptance at the Republican National Convention (RNC) last month, or an “upside blowoff catalyst if there is a centrist message [in] her words?”
Nonetheless, Evercore points out that it isn’t just politics that is fueling volatility within the ongoing bull run.
The annual BLS Payrolls benchmark revision on Wednesday, Nvidia (NASDAQ:NVDA) earnings on Aug. 28, the two FOMC meetings in September and November, as well as numerous growth and inflation report releases might all make an impact.
U.S. stocks ended slightly lower on Tuesday, halting their recent winning streak as investors awaited the Jackson Hole Economic Symposium, which begins on Thursday. The three major U.S. indexes dipped, concluding a multi-session rally that saw the equities market recover from a sharp downturn fueled by recession concerns.
Evercore analysts believe the path for the S&P 500 to reach 6,000 remains “intact but prone to further volatility surges, befitting prior election years where Congressional control is as “tight” as 2024.”
