Five Hurdles the Market Must Clear this Fall

Top Value Stocks To Watch For 2014

September may be considered as, historically, the worst month for the market, but MoneyShow's Howard R. Gold still wants to share five other important obstacles he thinks are also standing in the way.

While you and I were enjoying the last rays of summer sunshine, the pundits, gurus, and Twitter addicts have sounded the warning bell for a rocky fall.

The Standard & Poor's 500 index (SPX) fell 4.5% from its August peak, the Dow Jones Industrial Average lost 5.4%, and emerging markets have been pummeled.

But the pundits say several big events—mostly political—could make things even worse during the historically weakest month for stocks.

How big an impact? Let's review them one by one.

1. Syrian crisis. President Obama has asked Congress to approve limited military action against Syria in retaliation for the alleged use of chemical weapons against civilians by President Bashar al-Assad.

After much hemming and hawing, I think he'll get Congressional approval and will then launch cruise missiles against selected targets. (On Wednesday, the Senate Foreign Relations Committee authorized military action by a 10-7 vote.) It will go on for a couple of days, the rhetoric will be heated, there may be some limited retaliation against US or Israeli targets, but it won't lead to a regional war. Or if he doesn't get the votes, there may be no fighting at all.

So, on a scale of 1 to 10, I'd peg the short-term impact at 4 and the longer-term impact at 1.

2. German election. Germans go to the polls September 22, and most pundits expect Chancellor Angela Merkel to be re-elected. But Social Democratic opponent Peer Steinbrueck's strong debate performance may narrow her wide lead in the polls.

Steinbrueck could make this election a referendum on Merkel's European austerity policies. Late last month, her own finance minister pulled a Joe Biden and said Greece may need another bailout.

Still, in an email, Klaus Deutsch of Deutsche Bank wrote me: "European policy will hardly change, no matter what the election outcome might look like. Only a true change in government to a SPD/Green government would open up a different position on eurozone debt issues."

My best guess: Even an upset SPD victory would have a short-term impact of 4, but a long-term effect of only 2.

3. New Fed chairman. The president punted on appointing a new Federal Reserve chairman to replace Ben Bernanke, after Democrats pushed back, on reports former Treasury Secretary Larry Summers was his choice over current Fed vice-chair Janet Yellen.

Read Howard's take on whether Larry Summers really saved the world on MoneyShow.com.

Still, well-connected reporters like Ben White of Politico, John Harwood, and Ezra Klein say it's still in the bag for Summers. Some liberal Democrats on the Senate Finance Committee may vote no, but I expect the Senate to hold its nose and confirm him.

Nonetheless, Summers' notorious abrasive style will take its toll. Six current Fed presidents and top officials—including Yellen and Bernanke—may step down by next year, and more could follow. So, I give the short-term impact a 3 and the long-term impact a 5.

NEXT: Is tapering tightening?

Page 1 | Page 2 | Next Page