There’s something about September that makes everyone feel a bit anxious. Back to school, end of vacations, back to business. It’s a particularly treacherous time for investors and the markets. As the Wall Street saying goes, “September is when leaves and stocks tend to fall. On Wall Street it’s the worst month of all.”
Well, this September is shaping up to be an especially difficult one for investors. So says Mohamed El-Erian, the CEO and Chief Investment Officer of Pimco, the world’s largest bond fund. Mohamed is a brilliant thinker and investment strategist, so you might want to pay attention to why he is telling investors to “prepare now for tricky times ahead.” He says the next few months will be volatile for the markets because of uncertainty coming from the US, Europe, Japan and the Middle East.
He has advice for investors: “Don’t wait to reposition portfolios as uncertainty will trigger volatility”. He says August is usually a bad month to make dramatic investment changes because traders are off on holiday and market volume is so light. But this year, Mohamed believes investors might want to “reconsider the conventional wisdom of waiting for the autumn to reposition their portfolios.”
Already we’re seeing stocks selling off because of the possibility of US intervention in Syria. Mohamed says investors have been also reacting to the possibility that the conflict there could widen and thus increase the scope for regional instability. So even though Syria is not a large oil producer, the regional conflict leads to higher oil and gold prices, a selloff in risk assets, and a flight-to-quality bid for US Treasuries.
Syria is just one of eight issues that Mohamed says is worrying investors. Here’s his list—classified by geography:
Will the Fed taper in September, by how much and why?
Who will succeed Ben Bernanke at the Fed?
Will Congress flirt with a government shutdown?
How will lawmakers handle the debt ceiling?
Where will Angela Merkel take European policy after her expected victory in upcoming German parliamentary elections?
How will official creditors respond to requests additional peripheral funding and the need for further debt reduction?
Will Prime Minister Abe come through on Japan’s “third policy arrow”?
How will the regional implications of Syria and Egypt play out?