GOLDEN VALLEY, Minn. - While enjoying the many delicacies on a stick at the MN State Fair, investors are also contemplating what lies ahead that may impact their investment portfolios. The head winds for stocks may strengthen in September, as a series of events unfold. Dan Ament, Financial Advisor with Morgan Stanley joins us to discuss.
September is historically tough for stocks: September markets have history against them, with the Dow down 60 percent of the time since 1950, declining on average 1% for the month. Through last week, the market was down about 3% so far for August. (CNBC)
August employment report: The August labor report released on Sept. 6 could weigh on the Fed's decision whether it will announce a reduction in quantitative easing.
The Fed and Chairman Ben Bernanke: The Fed meets Sept. 17-18, so volatility / anxiety may increase around that event. Just as there is disagreement in the market about when the Fed will taper, there's a range of opinions on how much it will reduce its bond purchases. Fed officials have said they would like to begin cutting back on purchases before year end and complete bond buying by the middle of next year. Fed Chairman Ben Bernanke holds a briefing after the September Fed meeting, his second-to-last post-FOMC briefing before his expected retirement approaching. The market focus on his replacement has already added volatility. Traders say an appointment of former Treasury Secretary Larry Summers would mean higher rates and be a minus for stocks since he is seen as less dovish than Fed insider Vice Chairwoman Janet Yellen.
Budget battling: September is just the beginning of an active several months, since it is likely the showdown in Congress, comes not with a budget resolution to fund the government by the end of September but with a debt ceiling debate in November. The bottom line is more fiscal restraint may be coming before the end of the year which is a headwind for the economy.
Around the globe: The German election Sept. 22 has been getting a lot of focus. It's not about what's happening in the German election; What's key is that the election has led to pent up problems they don't want to address until after the German election -Greece being one of them. People are pointing to the election as a pivot point for European policy going forward. Investors are also watching Japan, where Prime Minister Shinzo Abe has promised to decide in September on whether to raise the consumption tax by 3 points to 8 percent, which could slow the economy. Investors are also watching China to see if it is making a turn, after signs of improvement in manufacturing data.