We are poised to see significant volatility in US stock markets on Monday. Whether this is to the upside or not is the big question. The Washington debt debate is expected to climax on Monday as investors, politicians, and other interested parties wait for a potential government shutdown. The movement in the markets may be exacerbated by an ending quarter as institutional investors close out positions to capture gains.
These may not be trend-changing events, but short term movements are likely to be jostled by political posturing and quarter-end profit taking. What we are looking for is a compromise between the diverged Democratic and Republican parties. Any sort of compromise that sidesteps a shut down will save investors a lot of heartache on Monday.
What are we doing? Riding out the volatility. Because we believe that the improving fundamental picture will ultimately drive the longer term trends positively, we are not pulling out to avoid short term volatility. But if you have the ability to move swiftly and capture a few gains, then it may be worth considering a reduction of risk for the next few trading days.
Scott Stanley
scott@valleyoakwm.com
