Real-Time Insights: How Nasdaq eVestment Tracks Asset Manager Trends Amidst Market Volatility

July 2024 was a volatile month and has continued thus far in August as equity volatility (VIX Index) had its largest intraday spike in history going back to 1992 on August 5^th—even eclipsing March 2020. This volatility was exacerbated by positioning and heightened geopolitical risks.

Understanding July and August 2024 Market Volatility: Key Drivers and Impacts

Following a softer June CPI report, a weaker July ISM manufacturing report, and then the U.S. unemployment rate rising to 4.3% in July—highest level since October 2021—the markets have, again, moved aggressively in pricing in up to five Fed rate cuts over the final three meetings in 2024, beginning with expectations of a 25 to 50 basis point cut in September. This caused a meaningful leg down in U.S. Treasury yields as the 10-year yield closed the final week of July with its largest weekly drop since March 2022.

Concurrently, on July 31^st, the Bank of Japan raised its benchmark rate for only the second time in 17 years and also announced a scaling back in its asset purchase program—spurring the yen to appreciate by around 12% since its low versus the U.S. dollar in mid-July. The yen’s recovery was accelerated by the unwinding of popular macro “carry” trades, where investors borrowed in yen to fund the purchase of higher-yielding currencies and other risk assets. This yen unwind fed into Japanese equities—a favored strategy in 2024—as the Nikkei 225 fell by around 26% at one point since its peak which coincided with the yen lows in mid-July.

As investors scrambled to mitigate losses from faltering carry trades, they were likely compelled to liquidate assets in other markets, intensifying the sell-off in global tech and AI-related stocks. At the same time, mega cap tech earnings have come in mixed, with an uptick in investor concerns around the outlook for AI-related investments and expenses.

Nasdaq eVestment’s Role in Providing Real-Time Data

This cross-asset volatility was captured in real-time via Nasdaq eVestment profile reviews for macro hedge funds. Reviews of fund profiles are direct evidence of potential interest in a strategy. Per the chart below, the 7-day moving average of investor and consultant activity for macro hedge funds hit its highest since the end of September 2023.

This prior spike in macro hedge fund viewership on Nasdaq eVestment was also related to monetary policies as the Federal Reserve scaled back the number of rate cuts it expected in 2024 to two from four as it sought more progress in its fight against elevated inflation at the time.

This re-established the “higher-for-longer” interest rates narrative which, coupled with a still solid economic backdrop, spurred U.S. Treasury 10-year yields to 5% by mid-October 2023, before falling into year’s end.