August was a heart attack month. It went out by leaving a sad and fearful feeling in the markets. The small rebounds the markets experienced throughout the month were nothing more than quick breaths of fresh air, considering that the bears have validated the investors who are convinced of global economic recession. The aftermath of Lehman Brothers is as alive as ever and fear of another crash has invaded the markets.
The week of August 22-26 was characterized by optimism as central bankers held their annual meeting in Jackson Hole, Wyoming. The attention was on what Ben Bernanke, chairman of the United States Federal Reserve, would say in regard to the possibility of a third stimulus package. Bernanke did not say much and mentioned that any measure would not be taken until September.
Specifically, the measure would be a QE3 stimulus, but it is possible this would not be necessary if conditions are not as bad as initially predicted.
Pessimism is back. The lack of near-term palliatives for the peripheral debt crisis and abundance of tension related to a slower-than-expected road to recovery have weighed heavily on markets. The Ibex 35 lost 16.9% in 2011, and in August alone it dropped 9.47% to arrive at a low of 7,966 points on August 10. This level has not been seen since 2009. This has been the worst August since 1998, when the Russian crisis took place and caused a 20% decline.
