5. The Fed head selection represents a more significant market event than consensus believes. My money is on Larry Summers. The selection of Summers (the favorite) or Geithner (a very long shot) could cost the S&P something like 50 points, while the selection of Kohn or Yellen (second favorite) could be a marginal positive for the markets.
Though Summers has broad experience and is intellectually gifted, he would probably be difficult to work with, and the reduced transparency in a Summers-led Fed would likely increase asset price volatility. Both Yellen and Kohn are as qualified intellectually/academically and understand the workings of the Fed as they have been there forever. Also, they are highly respected by the other Fed members.
6. Politics will return to the front burner in the coming months. The September-October political agenda is lengthy, including the debt ceiling, government spending and immigration, tax and government-sponsored enterprise reform.
Though market participants have become inured to the nonsensical rhetoric, a lengthy fight and impasse could again weigh on consumer and corporate confidence as it has previously.7. The bull market is long in the tooth. We now lie almost 54 months from the generational low of March 2009. Over the past six decades, the average bull market has been about 43 months, the longest bull markets have lasted 56 and 60 months. (Note: The longest bull streaks didn't face the structural economic headwinds that we face today; they had long runways of growth and technological innovation ahead of them.) Moreover, the intermediate leg of the bull market, which commenced in November 2012, has already climbed by almost 30% in only eight months. 8. Changing leadership seen as a negative. As I recently wrote, sector/group leadership changes are typically a negative sign for markets. (And, as Jim Cramer suggested on Real Money yesterday, "It's hard to find leaders.") Former market-leading financials ( Financial Select Sector SPDR (XLF) is -4% off its high), housing (the most distributional pattern, with the iShares U.S. Home Construction ETF (ITB) -18% off its high), health care and biotech ( iShares Nasdaq Biotechnology Index Fund (IBB) is -4% off high) sectors are all extended and in recent weeks have begun to show signs of lost momentum, underperformance and possibly distribution. At the same time, materials have improved, but few others have, suggesting that a broader-based (and healthier) sector rotation is not yet in place.