Global Markets, On Your Mark! Taper Time Has Arrived

By Lloyd Khaner  SEP 17, 2013 3:55 PM

Other top worries facing investors include the situation in Syria and the US debt ceiling debate.

 


Who would have guessed that the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX), Nasdaq (INDEXNASDAQ:.IXIC), and sundry other global market indices would have rallied into the Great Taper? This moment has been anticipated, talked about, debated about, and soul-searched about since November 2008 when quantitative easing began. And now it is here -- and oh, how anticlimactic it is bound to be. And that’s a good thing as the Wall still has plenty to fret over, including when and what the next round of QE will be and look like.

While Syria still sits at number two on the list of the most troubling worries out there, raising the debt ceiling and passing a continuing resolution are tied for third. We find ourselves back in the negotiating hands of Congress and the president. Both know that the debt ceiling will be raised and that a continuing resolution will be passed, but what they and nobody else knows is when. Why not do it now and skip all the fuss, bother, finger-pointing, political wrangling, and market mayhem? (That was rhetorical.)

The good news, or potential good news, is that we might find ourselves pulling out of October having dropped anywhere from one to five worries from the Wall. And usually the market rallies higher as the Wall drops lower. Maybe it’s already discounted in the market... and maybe not.

Soon -- hopefully very soon -- we will get back to focusing on one thing: the economy, both in the US and abroad. After all, the rest is just a sideshow, although sometimes a very long and very loud sideshow at that.

Click on the image below for an interactive version of this week's Wall of Worry, or scroll down for the text-only version and an explanation of how the Wall works.





QE: September 18 will be the taper heard 'round the world... until the next one that is. 

UNEMPLOYMENT: More people dropped out of the workforce. Whew!

US ECONOMY: "Wishin' and hopin' and thinkin' and prayin', plannin' and dreamin'" that it continues to stay in the +2% range.

INVESTOR SENTIMENT: Money coming into mutual funds and out of ETFs, therefore market sentiment confusion staying put.

HOUSING CRISIS: This entry is coming off the Wall soon so if anyone has any reason why this worry should be kept on the WoW, let them speak now or forever hold their fretting.

EUROPEAN ECONOMY: If it ain’t getting worse, it's getting better... I hope.

VOLATILITY: Actually not so bad, considering an exchange or two shuts down once a week.

HIGH-FREQUENCY TRADING:
Lloyd: What do you think the market impact from Fed tapering will be?
HAL: Anything short of mayhem will be a disappointment.
Lloyd: That’s it. You’re officially off my holiday gift list.
HAL: What’s a holiday?

CHINA: Considering opening up their markets to REITs, margin trading, and shorting selling. Coming close to officially declaring, “The water’s fine, boys, come on in!”

GLOBAL ECONOMY: Sure would be a buzzkill if we got a oil price spike right about now.

JAPAN: Gets the 2020 Olympics. Does that mean it has to keep its economy levitated for the next six years?

CONTINUING RESOLUTION: The US needs yet another stopgap measure so it can pay its bills. Note: This is different from the debt ceiling issue, which allows it to continue to pretend that it will pay its tab in full one day.

BONDS: As we go to print, the 10-year yield is dropping steadily and all is calm. Best advice: Take a picture.

CENTRAL BANKS: Pouring more fuel on the monetary fire.

MORTGAGES: Demand for them in the US seemingly still on August break.

FRANCE: The Battle Royale With Cheese...which is worse, their political situation or their economic situation?

CONSUMER CONFIDENCE: Sheesh, if you’re gonna let the threat of a new war in the Middle East derail your spending bravado...

SPAIN: Sending a big "Nah-nah nah nah-nah" to Italy as their 10-year bond yields drop below those of their EU cousin to the east.

OIL PRICES: Syria comes off the table, and then oil comes off the wall.

RETAIL SPENDING: If the non-stop shopping sprees have ended in the US, what are people doing with their weekends, weeknights, and weekdays?

DEBT CEILING: Red lines being drawn by the executive and legislative branches of the US government. Once we get the Supreme Court to chime in, we will have a trifecta.

SYRIA: I think the US just hit a giant pause button.

EMERGING MARKETS: Leaders from the EMs seem more concerned about Fed tapering than leaders in developed markets. And they should be.

GERMAN ELECTIONS: The question isn’t who is going to win but rather what happens after she does.

FED CHAIR: Still Yellen vs. all comers.


What Is Lloyd's Wall of Worry?

by Lloyd Khaner

Welcome to my at-a-glance guide to the issues facing investors this week -- a unique tool for traders and money managers.

Typically the term "wall of worry" refers to the entire body of concerns influencing stock market action. When the wall is high, meaning the market is nervous, stocks tend to get cheaper.

This wall of worry is even more specific. Every week I list the exact concerns in the marketplace and use the list to help me make buying and selling decisions. As I like to say, "Buy fear, sell cheer."

In other words, once the the wall rises above 15 blocks, start looking for deals. If the worry count sinks below 10, consider selling; prices have likely peaked.
LK/KCLP Ownership Disclosure: SPY, QQQ, GLD, TBF.

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