Go Business with Markets

Various media outlets are doing their usual job of overreporting both Friday and yesterday’s “bloodbaths” on Wall Street, as well as Monday’s “big rally.” But the truth is that none of what’s happened since Friday has been either — it’s just the market being the market.

After a period of relative calm following June’s post-Brexit-vote instability, things have become unsettled again by uncertainty about what the Federal Reserve will do at its Sept. 21 meeting and beyond. But let’s face it, the S&P 500’s lack of volatility in recent weeks indicates that many investors had simply been away on vacation.

The 48 trading days between July 1 and Sept. 8 saw just one session (July 8) where the S&P 500 closed up or down by more than 1%. By contrast, the index rose or fell at least 1% 38 times during 2016’s first half, including each of the six trading days between June 23 and June 30 amid Britain’s Brexit vote.

In fact, the S&P 500 tumbled by more than 5% over the two sessions immediately following announcement of the Brexit referendum’s results. Then, the blue chips regained 5% over the three trading days that followed.

But the S&P 500 has been fairly flat since then, rising a mere 1.4% or so over the past 2-1/2 months. The summer ended up being a period of relative calm — surprising given a bevy of concerns that could have weighed stocks down.

But now that summer-vacation season has ended, investors apparently have the jitters once again as they await the Fed’s Sept. 21 rate-hike decision. I expect the past three days of volatility to only continue as markets digest every argument, nuance and emotion regarding whether the Fed will raise rates (and if so, by how much).

But it really doesn’t matter what the Fed does, folks. All that matters is whether the central bank’s decision is a surprise or not.

For example, a 1% rate hike would shock the markets, likely causing a bloodbath in both stocks and fixed income. However, Wall Street’s current expectation is that the Fed will simply hold off yet again on raising rates. Even a 25-basis-point hike (the most that’s expected) wouldn’t kill us.

Still, expectations are expectations. So, get ready for emotion-driven market gyrations and endless media coverage until the Fed actually announces its Sept. 21 decision. Then, we can start the whole process all over again until the Fed’s next meeting in November!

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