Macro Wrap – Odds of Taper as September Arrives?

by Enis August 30, 2013 8:15 am • Commentary

The summer debate over taper / no taper is close to a resolution.  As much as we’ve tried to avoid the simplification of financial markets to one central bank decision, we do still think the FOMC’s decision on September 18th will be a crucial market mover.  It doesn’t matter whether I think $10 billion either way matters much.  It matters whether the market thinks it does – and the market still seems to view QE as the magic elixir for stocks.

So I found it intriguing that the verdict is still completely up in the air now that we are less than 3 weeks away from decision day.  The Bespoke group has conducted an informal online survey a couple times in August to gauge the investment community’s opinion:

Screen Shot 2013-08-30 at 8.06.34 AM

In both cases, the survey was essentially split down the middle.  Granted, this is no scientific survey, but my general sense is that there is no consensus for the September meeting among market participants.

In that sense, next week’s heavy economic calendar holds particular weight.  There are numerous economic releases following the Labor Day holiday.  The big ones:

  • ISM Manufacturing on Sept 3rd
  • ADP Employment Change on Sept 5th
  • ISM Non-Manufacturing on Sept 5th
  • Non-farm Payrolls on Sept 6th

Payrolls on Friday will be the most closely watched release.  But the market’s reaction into and out of these data points will be a good indication as to whether the market starts to form a consensus about the policy decision later in the month.  We expect September to usher in a more volatile period than what we have seen for most of the past 2 months.