Get breaking news alerts via email

Click here to manage your alerts
Investors brace for a jam-packed September
First Published Aug 30 2013 01:18 pm • Last Updated Sep 02 2013 10:31 am

New York • Imagine gathering nearly everything that has rattled investors’ nerves over the past four years: the European debt crisis, fights over the U.S. government’s budget and moves by the Federal Reserve. Now imagine all of them crammed into one month.

That month? It’s September.

Join the Discussion
Post a Comment

"Oh, it’s definitely going to be fun," says Jason Pride, director of investment strategy at the money management firm Glenmede in Philadelphia.

As August wrapped up, trading desks and investment firms looked warily at the lineup of events in September and warned clients of turbulence ahead.

The Fed’s September meeting is when many on Wall Street think the central bank will begin winding down its massive bond-buying program. German voters will decide whether Chancellor Angela Merkel gets another term as the leader of Europe’s largest economy. And Congress will be on a tight deadline to pass a spending bill before the month ends, a process which could easily turn into another brawl over raising the government’s borrowing limit.

Each item on the calendar could cause big swings in daily trading. And collectively, they could make an often dangerous month for the market even more volatile.

"Right now, we’re probably in the lull that precedes the storm," says Mark Luschini, the chief investment strategist at Janney Montgomery Scott in Pittsburgh.

September has often been a cruel month for the stock market, which gives it a superstitious power for some investors. Since 1945, the Standard & Poor’s 500 index has slumped nearly six out of every 10 Septembers, with an average loss of 0.6 percent.

This one could be much worse, investors say. Luschini and others think the S&P 500 could fall more than 9 percent from its record high of 1,709.67 reached Aug. 2.

On the bright side, the same people who think the market is likely headed for a rough stretch in the coming weeks also think it won’t last. Even good years have bad months.

story continues below
story continues below

The Fed meeting, Sept. 18

First up, it’s the Fed meeting that everybody on Wall Street spent the summer talking about. Conventional wisdom says that the Fed will announce plans to trim its monthly purchases of bonds from $85 billion to around $75 billion. It would be the Fed’s first step toward winding down the $3 trillion bond-buying program launched during the financial crisis.

There’s trepidation about the move — known as "tapering" — because the Fed’s efforts have held down borrowing rates, a boon to the once-devastated housing market.

Minutes from the Fed’s July meeting showed "broad support" for scaling back. But there was nothing about how much.

The danger is that the Fed scales back much more than expected, says Glenmede’ s Pride. Maybe, for instance, the Fed will buy $55 billion each month.

"Markets will react as if the Fed is slamming on the breaks," he says.

Barring any big surprises, however, investors will likely take the Fed’s next move in stride, says Sam Stovall, the chief equity strategist at S&P Capital IQ.

Markets are supposed to be forward-looking and Fed Chairman Ben Bernanke started signaling a move to withdraw some support in May. People have had months to prepare for it. "I think there will be a collective yawn if they start tapering in September," Stovall says.

Next Page >

Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment

About Reader Comments

Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.