This month’s wall:
September delivered a second straight positive month for equities as the market took the edge, and the hedge, off oil and natural-gas prices. With hurricane season over and most investors predicting future interest rate cuts, the Wall falls for the first time since April. Now at 13 blocks, it’s flashing a bullish signal.
The worries
1. U.S. economy: Some reassuring spin — ex-autos and ex-housing, the deceleration is nice and orderly.
2. Interest rates: The moment of truth draws near. Will Ben be a hawk, or will he start dropping cash from his infamous “helicopter”?
3. Inflation: I may be older than dirt, but I remember when a little inflation was a good thing. Now it’s the trans fat in our economic ingredient list.
4. Oil prices: No longer a one-way street to infinity. To be safe, I’ll start chillin’ when we settle in the $40s-per-barrel range.
5. Consumer spending: Has survived more premature obituaries than Bob Hope. (Cold comfort to the market.)
6. Housing prices: Median home prices post their first year-over-year drop since Roman times. We all know how that ended.
7. Iran: Acting more like a WTO candidate than the middle child in the Axis of Evil family. Those nuclear aspirations are still a mite troubling, though.
8. Corporate earnings: October owns all the stock market crashes in history — it’s the market’s very own hurricane season. Board ’em up and batten ’em down as third-quarter earnings flood the streets.
9. Volatility: There’s a lack of conviction on the Street as stocks surge and plunge, preventing either the bulls or the bears from declaring victory.
10. Stock option pricing: “C’mon, everyone was doing it.” Sure — and now everyone is planning on “spending more time with the family.”
11. Middle East: When you least expect it, peace breaks out on the western front. The market remains defensive anyway.
12. Terrorism: Apart from the world’s war zones, September was a calm month, but 9/11’s fifth anniversary keeps terrorism on everyone’s mind for now.
13. U.S. midterm elections: An uncertain outcome will only be good for a heaping helping of night sweats and panic attacks for investors.
Looking ahead
Financial debacle: As Amaranth demonstrated, there’s nothing like a hearty autumnal stress test for the system — keeps us honest.
Yield curve: Inverted again. Is this a false alarm or a harbinger of a recession? Keep on trackin’.
this month’s wall:
The verdict is not yet in: June gave us either one heck of a correction or the start of a bear market. The Wall rises for the second straight month as the three-way tug-of-war between inflation, interest rates and an unpredictable economy continues to create a whole lot of uncertainty for the markets. Despite the violent rally at the end of the month, stocks are getting cheaper as multiples contract, but we’re not exactly looking at a flood of bargains at this point.
The worries
1. U.S. economy: If it’s so good, why do we all feel so bad?
2. Interest rates: Coordinated global credit tightening is squeezing
liquidity out of the financial markets. Bye-bye, punch bowl.
3. Inflation: The Fed promises a fight to the death, and it may be more than jawboning.
4. Oil prices: Decomposed dino-saurs, a.k.a. fossil fuels, are once again taking the blame for the world’s many ills.
5. Consumer spending: If we’re workin’, we’re spendin’, but our monthly nut is bigger, so there are fewer extra goodies for now. Bummer.
6. Housing prices: Can a bubble deflate? Unfortunately, we may be about to find out. P.S. Rents are going up.
7. Iran: Playing its cards masterfully, but if oil prices drop, look for a quick cash-out.
8. Corporate earnings: Paranoia will destroy ya. Good numbers may not be good enough, and bad numbers could prove ruinous.
9. U.S. dollar: Much maligned. Maybe its new PR team, Paulson-Bernanke, can help.
10. Volatility: Itchy trigger fingers are ready to pull out fast, as a “the-bear-ain’t-gonna-get-me-this-time” attitude takes hold.
11. Emerging markets: Buy the dips... or are the dips buying?
12. Stock option pricing: The scandal du jour has the potential to trap more companies in its web than any other to date.
Looking ahead
Stagflation: Economic purgatory.
Hurricane season: It will be the most closely watched in U.S. history. ESPN coverage is not out of the question.
Trade deficit: No one’s buying our new stuff, so we’ll just keep selling them the old. Now on the block: Route 66, opening bid $2 billion. Deal or no deal?
North Korea: Wants attention, needs money. A global payoff should suffice.
Midterm elections: Let the mudslinging begin!
