Yen carry unwind: August 5 crash, full recovery by month-end
Monthly Performance
| Asset | Close | Change |
|---|---|---|
| S&P 500 (SPY) | 563.75 | +2.31% |
| Nasdaq 100 (QQQ) | 476.35 | +1.20% |
| Russell 2000 (IWM) | 218.11 | -1.52% |
| 20Y+ Treasury (TLT) | 100.22 | +2.35% |
| DXY | 101.69 | -2.22% |
| Gold | 2503.30 | +3.40% |
| VIX | 15.00 | -7.22% |
Macro Dashboard
| Indicator | Month-end | vs. prior | vs. YoY |
|---|---|---|---|
| Recession probability (CVRP) | 64.00 | −6.00 | +19.00 |
| 10Y Treasury yield | 3.91% | −0.18pp | −0.18pp |
| 2s10s spread | 0bps | +20bps | +76bps |
| VIX | 15.00 | −1.36 | +1.43 |
| HY credit spread | 317bps | −8bps | −68bps |
| CPI (headline, YoY %) | 2.61% | — | — |
| Unemployment rate | 4.20% | −0.00pp | +0.50pp |
| WTI crude | $74.52 | −$4.84 | −$9.03 |
Values captured at month-end (last available daily observation). Sources: FRED (rates, credit, commodities, labor), BLS (CPI), Convex proprietary indices (CVRP).
What Happened
August 2024 was dominated by the first week's violent yen carry unwind and subsequent recovery. The July 31 BoJ 15 bp hike and weak August 2 NFP (114k vs 175k, Sahm Rule triggered) set up the Monday August 5 crash. The Nikkei 225 fell 12.4% (worst since 1987). US equities opened down 4%. VIX opened at 65 (from 23 Friday close). S&P 500 ultimately closed -3%.
The recovery was as fast as the decline. Forced-selling pressures eased by Tuesday. Systematic strategies re-entered through August 8-12. By month-end the S&P 500 had fully recovered and extended to new highs at 560 (from the August 5 intraday low of 510). The round-trip illustrated that the August 5 crash was positioning-driven rather than fundamentals-driven: no recession confirmation followed, and earnings season was resilient.
Powell's August 23 Jackson Hole speech was the catalyst for the second-half-of-month rally. He explicitly committed that "the time has come" for policy adjustment, removing ambiguity about September cuts. Bond markets priced 100% probability of a September cut with 50% odds of 50 bp. The Fed would deliver the 50 bp cut September 18. Small caps and rate-sensitive sectors led the recovery, with IWM gaining 3.5% in the final two weeks. The month closed with S&P 500 up 2.3%, masking the extreme intra-month volatility.
Key Dates
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