List of Worries In September Is About To Get Longer, JPMorgan Sees September ‘Tsunami’ of Volatile Data and Headlines

Tuesday, September 3, 2013
By Paul Martin
September 3rd, 2013

The list of worries for markets this September just keeps getting longer.

September is historically the worst month for stocks, but this year, the calendar is a minefield for markets. From the Federal Reserve’s mid-month meeting to German elections, Japanese tax changes, and U.S. budget debates, there’s been a long list of potential catalysts for pain.

Add to that the sell-off in emerging markets which as the Fed signals a move to normalize rates has resulted in a jump in interest rates for emerging economies and has driven the Indian rupee to all-time lows. The looming possibility of a U.S. strike on Syria is the latest worry and is to be determined by the U.S.Congress when it returns Sept. 9.

There is also the question of whether the U.S. economy will really accelerate, or whether there are cracks showing up in the housing recovery, a concern as interest rates rise. Data this week, including the important August jobs report this Friday, will be a key barometer for third quarter strength and an important element for the Fed’s decision on whether to pare back its $85 billion a month in bond buying when it meets Sept. 17 and 18. Anticipation of a “tapering” of bond purchases has sent interest rates higher since early May.

“We know there has been a tapering story which has also turned into an emerging market sort of crisis story, and now on top of that you have this Syria story. You kind of have this triangle of pain,” said Michael Hartnett, chief global equity strategist at Bank of America/Merrill Lynch. “Could one help to offset the other? There’s no doubt that at the margin, Syria has the potential to reduce the tapering at the Fed. It’s very much at the margin. The problem is the Fed is not going to see the real economy any impact from Syria in the next 20 days.”

President Barack Obama’s delay this past weekend in what appeared to be an imminent attack on Syria was a positive for stock futures and a negative for oil. But it is also another reason for markets to watch Washington with a heightened level of anxiety. Congress already has spending decisions to make on funding the federal budget and will be debating the debt ceiling, which the Treasury Department says will be hit in October.

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