Part 4/6:
The August Market Crash: A Chain Reaction
The volatility experienced in mid-August was precipitated by a confluence of factors, predominantly rooted in rising concerns over the US economic outlook. Investors began to react sharply to data indicating weak job growth and recession risks. This anticipation of a downturn led to hasty liquidation by Japanese financial firms, further exacerbating market declines.
The Bank for International Settlements (BIS) noted that even seemingly minor news about US labor market weakness catalyzed significant volatility. This hyper-sensitivity to economic signals intensified selling pressure among investors heavily reliant on leverage, leading to a spike in both credit spreads and volatility metrics.