Fall Catalysts To Watch

Includes: DIA, SPY
by: John Eastman

Many investors key in on a company's catalyst events and accordingly take long or short investment positions as their strategy. A similar approach can be applied larger scale using upcoming catalysts associated with government, economic and general news. Landing on the right side leading up to, on, or after the catalyst point could benefit an investor handsomely.

Here are two catalyst points to consider in the very near future:

Friday (today) is the last day the markets will be open for August. Coincidentally, it is also the day that Federal Reserve chairman Ben Bernanke will make a keynote speech at the annual Jackson Hole meeting of central bankers. The expected talk points include the much-anticipated QE3 (third round of quantitative easing) subject - if it will happen, when it will happen and how the Fed will execute its interest rate policy for the next few foreseeable quarters. Many analysts are anticipating that the Fed will simply play a continued passive role and extend its prior policies, the net being that no QE3 or related stimulus will materialize anytime soon.

Others expect a fourth-quarter action to be taken, as the Fed awaits further economic news as manufacturing, unemployment, housing and GNP numbers roll in. Since the economy is not backtracking, but sputtering along in a positive manner bit by bit, some feel the Fed will not act on stimulus unless economic conditions worsen. If investors expect the Fed's passivity to continue, then possibly sitting tight may be in their best interest, as the markets have been active, and mostly positive and profit opportunities are apparent.

If one believes a more active role with a monetary stimulus is to occur, equity markets, commodity prices and weakening of the dollar would be experienced. Treasury notes could experience a sell-off but some analysts believe they will hold despite low returns. The market's performance has been primarily positive for 2012, with many investors active in the game. This could sour if the Fed injects policies that enable inflation to rise. History has shown that the actions and the results intended by the Fed do not always turn out as projected. Remember the TARP money?

Europe economic issues and progress

This is one to watch, as many global positive or negative news events will spill over to the U.S. economy and markets. Greece is not a settled matter and needs to be soon. Its debt issues have dampened the U.S. markets multiple times as Greece sinks the entire European Union's economic picture. An announced resolution of its matters will play positive and may boost markets there and in the U.S. Anything less than that (including a delay into the fourth quarter) could be negative news and cause a downturn everywhere.

Many eyes will be on the actions of the European Central Bank's policies and direction for buying government bonds (September 6 meeting), again a good indicator for better or worse times ahead in the EUC, and again with positive or negative effects here in the U.S. markets. Resolution of Spain and Italy bailouts are other hot points to watch.

Basically, a close watch on the Fed's actions, and all things European, for hints of positive or negative news is key, and subsequently a blend of good anticipation skills and investment readiness will enable investors to capitalize on catalysts events.

This article was also published on the Chairman's Blog.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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