Chart update IV

The only thing that has changed meaningfully in the past week or so is volatility: both implied volatility and the volatility of stock prices. Swap and credit spreads, gold, commodities and the dollar are largely unchanged in recent days.

What's the source of the volatility? It could be the disconnect between investors' fears of the future and the lack of evidence that the fundamentals of the U.S. economy are deteriorating. Fears can't get traction if they don't impact the economy in some fashion, but they can make for choppy markets.

ADP has been doing a somewhat better job of late in predicting the monthly change in private payrolls. Their estimate (released today) for August (+190K) is pretty close to the market's guess (+205K, to be released by the BLS this Friday), and either value would be a nonevent since it wouldn't represent much of a change from the average of the past several years, and it would be well within the normal monthly variation.

Posted by Unknown

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