The Perfect Storm
By John Nyaradi
Sept. 11, 2013
Syria, next week’s Fed meeting and the upcoming debt ceiling battle set up a perfect storm for global financial markets.
Syria remains a fast-moving and fluid situation, as first the “fear” trade took hold, sending equity markets lower and gold and oil higher. Then, virtually overnight, a diplomatic solution is now on the table and the “fear trade” is currently unwinding, at least for the time being, as world governments explore the Russian proposal for disarming Syria of its chemical weapons. Expect the twists and turns of this drama to continue whipping financial markets over the next few weeks.
Sept. 17-18 brings the long-awaited Federal Reserve meeting, Bernanke press conference and the anticipated beginning of the end for quantitative easing. The latest noise from Wall Street Journal columnist John Hilsenrath points to a “dovish taper” after last week’s nonfarm payrolls report came in weaker than expected.
The latest rumblings point to a small reduction in the Fed’s bond-purchase program to the tune of $10 billion/month, which would reduce the program from $85 billion to $75 billion and leave options open for future action depending upon the strength of the economy and employment.