September Could Bring a Market Correction
Basing the Fed's decision to start tapering on economic data is what keeps the markets on edge and it has worked perfectly, as interest rates have gone up without the Fed's doing anything. I wouldn't be surprised if the Fed lets us know that the economy is strong enough to start tapering either in September or October.
2.) Running Out of MoneyIt's the time of year for both parties to fight while the country runs out of money because of budget balancing.
The Republicans said there will be no budget unless the Democrats and the White House agree to repeal or deny money to Obamacare. Democrats and the White House have no plans to do so and are gambling that the Republicans will be seen as the bad guys if the government does shut down.
While there is no dialogue taking place, the government is expected to run out of spending authority at the end of September or some time in October. As usual, it will either go down to the wire or past the deadline before anything gets resolved -- if it does.
This is going to have an adverse effect upon the markets in September.Last year from mid-September through mid-November, the markets fell just over 7% (take a look at the S&P 500 (SPX)) because of the fiscal-cliff crisis and, since Congress is dealing with the budget and the debt ceiling, don't be surprised if the markets react the same way until some solution is brought to light. I don't have a crystal ball to predict when something like this can happen, how the market would react, or even how far it would fall. At the least, this should raise some red flags for investors.
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