Investors Should Be Ready For Action This Week
The year may be coming to a close, but investors have a busy week ahead. So far, December hasn’t been kind to stocks. Although, let’s put it in perspective. The S&P 500 is still up roughly 25% for the year.
Nevertheless, investors are surely hoping for a better second half of December. And this week will bring plenty of opportunities for market-moving news.
Here’s the deal…
There are several key events happening throughout the week, particularly concerning the Fed and the government.
First off, the Senate will be voting on the budget deal. The House already passed the bill and the Senate is likely to do the same. But you never know. And, if the deal isn’t passed, we could have a repeat of October’s debacle.
Now, I don’t think the politicians will be so obtuse as to allow another government shutdown to occur. However, if the debate drags on in the Senate, investors could get spooked.
Perhaps more importantly, this is the week the Fed announces if a December taper will take place or not. In other words, the Fed will decide if it’s going to slow the pace of bond purchases it makes each month.
The Fed’s actions this week are far from a certainty. Experts seem to be equally divided being December, January, and March on when the taper will begin. Economic news has been better than expected, but the economy still has some concerns.
If tapering starts this week, the market may sell off to some extent – although the amount of the taper is equally important. There are several variables investors will be closely watching. As such, how the market reacts is anyone’s guess.
Finally, the vote for Janet Yellen as the next Fed chief is scheduled to occur this week in the Senate. I don’t expect there to be any issues with Yellen’s confirmation. However, investors won’t look too kindly on the situation if the vote gets hung up at all.
Clearly, there are plenty of reasons the market could see some action this week. However, as an options investor, I’d be careful about going long options (such as buying straddles). If nothing surprising happens, those long premiums will melt away in a hurry.
Yours in Profit,
Gordon Lewis
Category: Breaking News
