We have seen a summer relief rally on the US and European stock markets in July. But several threats remain to the stock market. The VIX has fallen too much in our view.

The price rise in equity markets during July has been supported by a simultaneous price increase for HYG (a US high credit risk corporate bond ETF). Five- and ten-year US Treasury yields are broadly at the same levels as at the beginning of July, where a strong labour market in the US is offsetting falling commodity prices now.
 
The VIX, which measures market volatility, has come down sharply during July to what looks like a position with a strong possibility of a turn to the upside again. Autumns through October usually bring some weak and turbulent periods for the stock market.
 
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MARKUS AUGUSTSSON
Head of Equity Research
markus.augustsson@carlsquare.com
+46 (0)76 235 03 20

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Set up for a rebound in the VIX soon