After a brief recovery, markets are about to go crazy again, says Goldman Sachs.
Major indices may be a stone’s throw from record highs, but things could get rocky, especially as we near October. In fact, according to Goldman, as reported by CNBC, stock volatility has been 25% higher in October on average since 1928. “We believe high October volatility is more than just a coincidence,” notes the firm. “We believe it is a critical period for many investors and companies that manage performance to calendar year-end.”
While the CBOE Volatility Index, or the Fear Gauge, has been relatively calm for the last several days that could soon change. Especially as hopes for a near-term end to the trade war fall apart.
Trade War Resolution Hopes in Peril
Days ago, President Trump said he would be open to an interim trade deal with China. Markets then shot higher on optimism.
However, that recovery may be short-lived.
President Trump now says there’s no need for a trade deal ahead of the 2020 election, as he rejected a partial agreement with China. China then canceled a trip to farmland in Montana. In fact, a representative for the Montana Farm Bureau Federation confirmed that the Chinese delegation intended to visit Montana farmland as a part of continuing discussions with the U.S. on trade, says MarketWatch, but China changed travel plans and would be leaving without a stop in Montana.
“This morning, we received word that they would no longer be visiting Montana but would instead, be returning to China sooner than originally planned,” said Nicole Griffin Rolf, director of national affairs at the MFBF. The visit by the Chinese delegation had been viewed as reflecting a thaw in a yearlong Sino-American tariff dispute.
All of that is raising fears we may not see a resolution by October either.
If the two sides are already struggling for common ground ahead of the hopeful October 2019 meeting between the U.S. and China, downside is a real possibility. Investors may want to consider protecting their portfolios ahead of potential fallout, and trade war delays.