After the volatility in July and August, some traders had their worst summer in years, being forced out at the bottom or in at the top, ,while those who went to the beach may have returned to find their portfolios little different than they left them. Under the surface however, things are changing, politics in the US are developing fast while the anti Globalist populism in Europe has got stronger in the face of attempts to suppress it. The Fed has acknowledged that the time has come for lower rates, which is switching attention to the prospect of a weaker US$ and the idea that the monopoly profits that underpin the S&P earnings may come under treat from both regulators and global competition is starting to shift the focus from momentum and memes onto cash flow, yields and diversification.

Having initially decided the early August sell off was all about Economics, the pundits were forced to concede that it was actually market mechanics - in this case the partial unwind of the Yen carry trade, leading to a surge in Google searches for the term. We see this more as an unwind of the three big anomalies from the summer- concentration risk in US equities, repressed levels of volatility and an ultra cheap Yen. Traders are nevertheless nervous of past August analogues, particularly August 2000, when a similar small increase in Japanese rates burst the Dot Com bubble, but we also see echoes of August 1998, when the Russia default blew up LTCM and triggered a similar flight to safety in US bonds that was mis-interpreted as a signal of an upcoming recession. Indeed we see the latest calls for a recession and a Fed pivot driving US 10 Year below 4% as a new anomaly.