NEW YORK (TheStreet) -- Markets are in a transition period, moving from the typical summer doldrums to the more normal liquidity levels seen when the day trading community comes back in full strength for September. This summer, the S&P 500
So the real answers to where the market is headed next will likely be found in the outcome to the Fed's plans to discontinue its quantitative easing programs, as there are still significant questions that will need to be answered in order to construct a proper timeline for when interest rates are likely to start rising.
To accomplish this, most analysts have looked at the general state of the labor market and the positive trends that can be found in the declining unemployment rate. For most of the year, the U.S. economy has averaged 200,000 new job additions in its monthly non-farm payroll, and this has created a consensus expectation that puts the Fed in a position to start raising interest rates toward the middle of 2015.
Mounting Questions For Potential Strategies
In addition to the improved jobs numbers, the unemployment rate is has dropped to half-decade lows. This has helped give an upside boost to consumer confidence levels and broader retail spending, according to recent reports released by TradeSpoon. So next we have to ask: does this mean that the economy is truly ready for an environment of rising interest rates? And are investors prepared for the change in expectations if the Fed is not able to act as quickly as most analysts expect?
Slowing summer volatility can often lead to trader complacency, and there are reasons to suggest that these types of trends will continue this year as well.
So there is a wide variety of critically important questions that are mounting, and it makes sense for investors to take a step back and reconsider their long-term income investing strategies as we head into the final months of the year.
Specifically, should market analysts projecting new highs for the S&P 500 be focusing this intently on the state of the labor market? Recent studies on the changing nature of statistical surveys have discussed developing trends in household response behaviors for economic studies themselves, and the troubling conclusion could lead to more negative projections in key metrics like the national unemployment rate.
All of this means that the Fed could have a much more difficult task ahead in maintaining its timeline for the normalization of its interest rate policy. If you are an investor looking for yield opportunities, this means you your options will be more limited when you consider your positioning prospects for the next few quarters.
So what should investors do?