Posted August 31, 2012 19:20
This morning Mr. Ben Bernanke spoke about monetary policy. Even though he didn’t say that the Fed was going to announce ‘QE3’ during its September meeting, Mr. Bernanke, Chairman of the Federal Reserve, did give a clear enough signal (at least in the mind of traders) that he was reading to pursue future programs such as another round of bond-buying.
The market initially fell on this news but almost immediate recovered as people started to realize that the Fed is willing to do more if necessary. The market closed out the day up around 0.75% as the market goes into the long holiday weekend looking towards September. The first week of September will definitely have lots of market moving news. First, on Thursday there will be the ECB meeting where Mario Draghi, President of the European Central Bank, will discuss future bond-buying programs. Then the next day, the U.S government will report the non-farm payrolls. Not only will this be market moving it will also influence the Fed’s decisions on whether or not they will do ‘QE3’ during their September 13th meeting.
I would expect September to have exceptional volatility, which could make trading very difficult. This past August and been a classic example of the ‘dog days’ of summer. The market was basically flat for the month of August. Except for the Jobs Report on August 2nd, the Market only had a few days that came even close to a 1 percent move on the S&P 500 Index.
Despite the fact that the market was basically flat for August, there were a few sectors that didn’t significantly underperformed the broader market. One of which was Telecom, stocks like Verizon (VZ) and AT&T (T) did pretty poorly. Utilities also did poorly, which included names like Con Edison (ED).
My overall opinion of the market, is that any disappointment out of the ECB and/or the non-farm payrolls report next week could dampen the entire month of September and could lead to a 5-7 percent pullback before the Election.