Factors Influencing Markets This Week

Forget futures, ignore the VIX and hang on for a wild ride on Wall Street this week. The usual indicators are likely out the window and all eyes will be on us. Expect world markets to be on a hair trigger for the slightest whiff of bad news.

U.S. markets sagged on Friday but closed higher for the week after the Fed announced it would (again) postpone a rate hike, this time until December. But last week could be just the warm-up for the fireworks we could see this week. Markets started off the week sharply lower, continuing Friday’s slide. Here’s what to expect from the rest of the week.

Economic Indicators

This week we’re going to find out how consumers are feeling about the economy and whether those feelings are translating into spending. When consumers represent nearly seventy percent of your economy, how much money they have in their pockets and their willingness to spend it is big news. The data so far shows the U.S. economy limping along, but generally doing all right; but not great. The biggest factor at play in the numbers today is uncertainty. The trouble is that uncertainty alone can undermine the economy, even in the absence of any major disaster.

OPEC

We’ve spent a lot of time talking about oil the last couple years and there’s going to be more talk this week. The Russian energy minister is meeting with representatives from OPEC to discuss a production cut. With Russian oil production running at record highs, it seems unlikely that Russia will agree to just turn off the spigot. The Saudis have already spiked the meeting next week by suggesting that there would be no deal on production cuts. Look for over-production to continue and oil prices to crater this week. On top of that the dollar has continued to show strength as measured against other world currencies. All that is bad news for the U.S. energy sector, which just can’t seem to catch a break.

Presidential Debate

Many economists are pointing to the U.S. presidential election as one of the factors hurting our economy right now. New jobs in August dropped to 155,000; down from over 200,000 new jobs in the months leading up to our summer of national discontent. This slowdown in hiring is matched by businesses holding off on investments in new equipment and facilities.

The political divisiveness is also spilling over to consumers, who seem to be cutting back on big ticket spending in advance of the election. All eyes will be focused on the debate tonight, and as many as a third of voters have indicated that the presidential debates would help them make up their mind who to vote for. Some media analysts believe tonight’s debate could rival some of the biggest events in television history.

Uncertainty is weighing on business and consumers. Until that jitteriness abates, and provided we don’t experience an external shock from an unexpected disaster, we could end up seeing 2016 turn out to be a decent year after all. But if the uncertainty continues or gets worse, we could find ourselves mired in the early stages of recession just as easily. While it’s not unheard of that a presidential election would give the markets pause, few analysts can remember when an election has cast such a pall over the economy and the general public.

When there’s this much drama around a simple debate, you can bet the rest of the week is going to be really interesting.