What's going on?

The extreme volatility in stock markets continued � this time with US stocks ending the day roaring higher to close up 4% on the day!

What does this mean?

Buyers stepped in to take advantage of the sell-off that had knocked more than 10% off major US stock indices. While concerns about slowing Chinese economic growth remain, the US economy may prove resilient. For example, data released yesterday showed a strengthening US manufacturing sector.   In a further boost to stock markets, an important US Federal Reserve official suggested that the Fed would be less likely to raise interest rates in September � an inaction that would likely be supportive of stock prices.

Why should I care?

1. Remember how we�ve been saying how hard it is to pick a bottom in stocks? Well, not many commentators were calling a bottom after the brutal price action in the US on Tuesday, but yesterday we got one of the biggest rallies in history.
2. While US-based multinational companies will likely continue to see weakness in their Chinese operations, much of this is probably now priced in. And the US economy might just be strong enough to weather a Chinese slowdown. So this �correction� might ultimately prove healthy for stock markets; and investors that had a balanced portfolio going into this volatility � and were/are able to redeploy capital into stocks appropriately � will likely have benefitted the most.