The market’s annual summer lull appears to have finally arrived after months of on-off tariff drama. That doesn’t mean investors should reach for a piña colada and hit the beach.
The gauge that tracks stock market uncertainty—the Cboe Volatility Index, also known as the VIX or the ‘fear index’—slumped to its lowest level of 2025 on Wednesday. Fixed-income investors are also feeling relaxed: The ICE BofAML Move Index, which measures bond-market volatility, fell to its bottom for the year as well.
It’s not unusual for those fear indexes to dip in mid-August. It’s when Wall Street traders and brokers toggle on the “out of office” button and head to the Hamptons, leading to a sharp drop in volumes.
But this is more than a typical
summer lull. Over the past couple of days, investors have become convinced the Federal Reserve is about to start slashing interest rates due to soft jobs data and a benign inflation reading. Treasury Secretary Scott Bessent is among those calling not just for a cut, but aggressive easing. If the Fed doesn’t play ball, it could be a shock for the market.
There’s money to be made in that sort of environment. Home builder stocks D.R. Horton and Lennar have jumped this week, with traders betting that lower borrowing costs will lead to a surge in construction. The small-cap Russell 2000 index has racked up solid gains, too.
Cryptocurrencies are also benefiting from rate-cut bets. Large-cap token Bitcoin hit a record high on Wednesday, and shares in CoinDesk owner Bullish skyrocketed 84% in a stellar initial public offering.
Volatility may be
plummeting, but investors should be willing to swap their deck chair for a desktop. Piling into the rate-cut trade looks like an easy but risky way to make a quick buck.
—George Glover
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CONTENT FROM: Blue Owl Capital
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Asset-Based Finance: Private Credit’s Next Chapter
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As private markets expand, Asset-Based Finance is emerging as a key focus in private credit—offering new opportunities for investors. Blue Owl’s Ivan Zinn shares what’s driving this evolution and how he believes the firm is positioned for what’s next.
Learn more
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Trump’s Emerging Markets Behavior Unsettles Some
Investors have typically penalized emerging markets such as Turkey, Argentina, and
China over concerns about central bank independence, government intervention in the private sector, and rampant overspending. But now economists and strategists are raising similar concerns about the U.S., historically the paragon of a developed market.
- These strategists see unnerving parallels to emerging markets in the
unconventional actions President Donald Trump has taken to swiftly upend geopolitical and economic norms. Stocks and other financial assets have gained value since January, but if the patterns hold that premium could shrink.
- Trump has pressured Federal Reserve Chair Jerome Powell to cut interest rates, warned judges to not rule against his tariffs, fired the head of the Bureau of Labor Statistics after a weak jobs report, called for the ouster of Intel’s CEO, and sought unprecedented concessions from companies and countries.
- There are newly heightened concerns about the sustainability of the
U.S. fiscal deficit. Cornell professor and former IMF researcher Eswar Prasad told Barron’s that what is the norm in many emerging markets is becoming the new norm in the U.S., including undercutting agencies that gather data.
- Three things that have been crucial to the U.S. dollar’s dominance are the rule of law,
checks and balances, and central bank independence, and “each of those pillars is significantly being undercut,” Prasad says. Dollar dominance is a factor in the premium typically commanded by U.S. assets.
What’s Next: Markets have been unfazed for now, with the S&P 500 and Nasdaq hitting new records on Wednesday. But observers warn that policy shifts could begin to weigh on stocks if cracks emerge in the optimism around AI to reshape the economy and fuel corporate spending. For the full story, read here.
—Reshma Kapadia
Amazon Takes Aim at Walmart in Grocery Delivery Push
Amazon is pushing into one of the few retail sectors it hasn’t conquered: groceries. The e-commerce giant is expanding same-day grocery deliveries in more than 1,000 places nationwide, with plans to expand to more than 2,300 locations by the end of 2025 in a challenge to Walmart.
- Prime members can get free deliveries on orders of $25 or more (or $2.99 for smaller orders), while nonmembers pay $12.99. Walmart and
grocers Kroger, Albertsons, and Publix have a greater share of the trillion-dollar grocery market. Amazon’s 22.6% share lags behind Walmart’s 32%, Emarketer research said.
- It’s designed to complement Amazon’s existing grocery delivery services, which include Whole Foods’ online market and Amazon Fresh. The 2017 purchase of Whole Foods was aimed at boosting Amazon’s
so-called last-mile delivery capabilities. It has tried to break into the grocery market for years.
- Meanwhile, it has seen fresh competition in food and grocery delivery from newer entrants, including Instacart, Uber Technologies, and DoorDash. Amazon plans to
spend $4 billion to triple the size of its delivery network by 2026.
- Amazon Fresh has struggled to gain a foothold among consumers, particularly in bricks-and-mortar grocery, which remains the primary channel for grocery purchases. It temporarily halted opening more Fresh stores in 2023 and closed a couple of underperforming stores.
What’s Next: Walmart is expanding a 10% employee discount to nearly all groceries bought in-store and online year around, except for clearance items. The discount had previously excluded staples like milk, pasta, frozen pizza, or meat, except during the November-December holidays. Walmart reports July-quarter earnings on Aug. 21.
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