Posted February 27, 2013 21:02
In two days, the so-called ‘Sequestration’ will hit. The effects of sequestration could amount to a decrease of 0.5% off of our GDP. But more importantly, could cost many people their jobs. Investors all around the globe are wondering how sequestration will affect their portfolios. Some analysts say it’s baked in, where as other analysts say sequestration will cause a minor pullback. But, in my opinion Sequestration isn’t that big of a deal. This country has way more problems, and something that will make all investors happy is the fact that the United States will finally cut some spending from their budget. Every penny that the federal government can cut is a start to a balanced budget, but at this point in time, a balanced budget is a dream, considering we that have trillion dollar deficits every year.
Looking forward to the month of March, what are some events that may rattle the markets? One key event that will be watched is the jobs report on March 8th. The reason this jobs report is very significant is because over the past couple of weeks, investors have had their doubts about the sustainability of the QE (Quantitative Easing). A good jobs report will solidify an improving economy where a bad jobs report will signify a need for more QE. The jobs report will be key for one major commodity, gold. If there is a good jobs report, investors will feel the need for QE will diminish and, therefore, will negatively affect the price action of gold as investors will transfer money from gold and place it into more risky assets such as stocks. If there is a bad jobs report, the opposite will happen. Towards the end of the month, the looming government shutdown will be the talk of Wall Street and Washington, as investors will be watching that event closely as the potential of a government shutdown will make investors very nervous and therefore cause a pullback.
The price action of the stock market has been bullish since the start of the year. But now that we enter a time where there are events that could rattle the market, investors should watch out for potential pullbacks and be aware that there are many events beyond this month that are worrisome. No one will forget the damage that the debt talks caused in August of 2011, and with debt talks resuming this May, many investors may follow the motto of ‘sell in may and go away’.