Is it over? The (growth) scare and the (vol) shock, I mean.

In some respects the answer’s obviously yes. Rich vols were sold, downside hedges were monetized and the equity dip was bought.

But beyond the muscle memory — panning out from Pavlov, if you will, and stepping back from the actual flows behind a record-fast reversal — I’m on board with the notion that what market participants witnessed early this month was indeed some manner of “dress rehearsal,” as JPMorgan’s cross-asset strategists put it.

If you listen to recent interviews with Claudia Sahm, whose eponymous UNR recession rule played a starring role in the tumult seen across August 2 and August 5, her message is straightforward: The US almost surely isn’t in a recession, but the trend in the labor market, which the Sahm rule picks up, shouldn’t be ignored. That’s the macro.

On the markets side, recent events were another “fragility” reminder. Modern markets are wild-eyed beasts prone to exaggerated swings which, to the layperson, can appear inexplicable and, in some cases, terrifyingly mercurial. And while positioning’s much cleaner now, crowding’s still an issue.

Simplistically — which is to say just glancing at spec positioning — the yen carry trade’s unwound.

The figure above suggests specs were forced out of yen shorts entirely this month. “Sayonara to the yen carry trade,” former Goldman FX chief Robin Brooks remarked.

But that’s hardly the whole carry trade. It may indeed be highly “representative,” as Brooks put it, but it’s a very small slice — around 5% on his estimation. And to be sure, we haven’t seen the last of the yen fireworks. JPY’s still undervalued, and as SocGen’s Puneet Singh wrote Monday, “the risk of a stronger yen on the back of divergent monetary policy is substantial.”

The figure below shows JPMorgan’s new “FOMO Indicator” for USDJPY. To construct it, they use the ratio of short-term Sharpes to long.

The idea behind the indicator, the bank explained, is to “roughly mirror where the money has gone, on the assumption that higher short-term Sharpes will attract inflows.” FOMO in dollar-yen, JPMorgan said, was “at a peak ahead of the pullback.” It’s since evaporated entirely.

The bank included in their analysis a scatterplot showing the most crowded trades using their new FOMO metric. USDJPY was the most crowded (by a mile), but US equities — both the Nasdaq 100 and the S&P, as well as the mega-caps, including Nvidia — screened very high.

The figure below just shows the most crowded trades from this month’s BofA fund manager survey.

Naturally, “long Magnificent 7” retained the top spot, but its share of the vote was down sharply from July, when it was among the most consensus crowded trades in the history of the survey. “Short yen” captured 12%.

If you look at implied vol for the Qs versus SPY, the spike seen earlier this month hasn’t entirely faded, suggesting consternation around the prospect of additional tech turbulence, particularly as Nvidia’s results loom.

“[W]hile price indices have largely mitigated the losses seen earlier this month, there has been re-pricing in volatility markets across asset classes,” BNY Mellon’s Geoff Yu wrote, adding that options gauges in equity and FX “have not and do not seem destined to fully retrace recent moves, which means net exposures will remain lower compared to a month ago.”

That, BNY Mellon suggested, is only rational. “After all,” Yu went on, “even if central banks are confident in the soft landing narratives, there are other exogenous risks which arguably have not been accounted for enough in asset allocation throughout the cycle.”