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“Every basis point of artificial yield suppression is a subsidy to procrastination.” — Stanley F. Druckenmiller
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
US futures started the morning higher and have been adding to those gains as we approach the open. The S&P 500 is up 0.44% while the Nasdaq is on pace for a gain of just under 1%. The rally is in stocks has been fueled by lower yields, as the 10-year falls 4 bps to 4.66%, and crude oil, which is down over 3.5% to just under $82 per barrel. Bitcoin briefly topped $80K overnight but has given up those gains and is now basically unchanged at $78.9K.
Asian markets were mostly higher, but only by modest amounts. The Nikkei traded 0.5% higher, while the Kospi traded up 0.7%. Similarly, in Europe it has been a positive session, but no major index is up by more than 1%. German GDP came in higher than expected, while Spanish PPI accelerated to 9.2% y/y in July versus 7.0% in June.
In the US today, House Price data for June will hit the tape at 9 AM, followed by Richmond Fed, New Home Sales, and Consumer Confidence at 10 AM.
It’s August, so it tends to be a quiet time of year, but with all that’s going on in the world right now, it’s hard to believe that the VIX is trading below the driving age. The VIX has been trending lower for several months, and it has been below both its 50- and 200-day moving averages all month.
While the VIX is slightly below 16 right now, it dropped as low as 14.23. That’s relatively in line with the August closing low for each of the last few years, and the last time the August low was above 20 was in 2020. For all years since 1990, the average August low was 16.2, so VIX readings in the teens in August are hardly a surprise.
At the high end of the range, the VIX hasn’t gotten above 16.42 this month on a closing basis. If that high remains in place through next Monday, it would be the lowest August closing high since 2018 when the VIX never got above 14.78. For all years since 1990, the average August closing high is 23.8.
While the closing highs and lows of the VIX this month are well below average, they aren’t necessarily that extreme. What really stands out about the VIX this month, though, is how narrow a range it has traded in. Just over two points separate this month’s closing high and low. Again, there are still five trading days left in the month (including today), but if the current range holds, it would be the third narrowest high-low closing range for the VIX during the month of August since 1990. The only two years when August had a narrower range were in 1993 and 1994.
On a separate note, an op-ed written by Stanley Druckenmiller in today’s Wall Street Journal criticized the Treasury’s decision, announced last week, to double the planned purchases of long-dated Treasuries from $2 billion to $4 billion, calling it a mistake and saying it damages “credibility far faster than any short-term yield suppression can repair it.”
Druckenmiller has never been a major proponent of Bitcoin, historically preferring holdings in gold instead, but in 2023, he said, “I like gold because it’s a 5,000-year-old brand… So, I like them both. I don’t own any Bitcoin, but I should.” This is speculation on our part, but given his concerns over US credibility and last week’s surge in Bitcoin prices, would anyone be surprised if he eventually says he owns some?
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