August has been an atypical month in the investing world. This has reflected in the markets, especially in the last few weeks of August and spilling over into the first weeks of September. Although the market recovered and in fact rallied there has still be volatility in the markets. There are many aspects that may be causing this, and the truth is likely a combination of all factors.
After the disruption that the Chinese markets have caused and the U.S. stock market rally afterwards, stocks have been in an “all or nothing” mentality. Between August 28th and September 4th there were eight all for nothing days. All or nothing means that stock will abnormally shift one way or another and most other investors will throw themselves behind this shift causing untypical shifts in the market place. This mentality has caused more turmoil in the markets causing a variety of stocks including the S&P 500 to shift in untypical ways, either gaining a lot, or losing a lot. The Dow has been extremely volatile. On average it will move around 150 points. Since mid-August it has swung on average 400 points. Speculation around this volatility has centered on the shakiness of the European markets, the fall and devaluation of the China market and the Yuan, and the speculation of whether the FED will raise the interest rate in mid September.
Market volatility in and of itself is not a bad thing. The market is a human machine and is subject to human worries and fears. Uncertainty in markets is nothing new, but there are also positive aspects to the American economy. However, some of the blame may rest with High Frequency Trading (HFT).
High Frequency Trading used lighting speed and fancy algorithms to buy and sell on the marketplace. Trading upwards of ten thousands shares per second. These algorithms are purely logical without possessing the human intuition that human investors possess. Because of their prominence and the volume of trades they make per millisecond, some argue they add automatic volatility to the marketplace.
There have been many critiques of the prominence of HFT, most of all by Michael Lewis’ newest book Flash Boys. HFT alone is not singularly responsible for the turmoil, although it may be adding to it.
Despite the market having undergone massive amounts of stress, the market still remained relatively strong considering the circumstance we find ourselves in. The dollar is the strongest it has been in a while, and the average spending of the American family has not decreased over the past few months. This suggests an underlying strength in the American market.
In these times it is important to know your investment is in good hands. Cambridge Realty Capital has time and time again shown themselves to be leaders in the investment sector. Our insights and dedication to ensuring smart investments in reality and in senior housing have been a safe haven for investments. We will continue to be a leader in the marketplace no matter what may happen.
