Jay-Z has 99 Problems and the Markets may be one

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Jay-Z has 99 Problems and the Markets may be one
By: Todd M. Schoenberger, @TMSchoenberger

I’m thinking of doing one of those fancy “Questions of the Day” for you guys. Here’s one: How much champagne have you purchased/consumed since the ‘shock and awe’ announcement of further accommodation, ala QE3, was made last week? Unless your name is Jay-Z, probably not very much.

Since Superhero Ben came to the rescue and told the world he plans on delivering $40 billion in un-marked bills to that thing in critical condition known as the United Stated Economy, the good times have yet to appear. For instance, the S&P 500 is up a very quiet 0.07 percent. Not exactly what many investors probably expected.

In addition, layoff announcements have been brutal. American Airlines and Bank of America recently announced massive personnel cuts; and there is widespread speculation that a certain financial services company is going to announce its own shock and awe pink slip plan in the coming weeks. Yeah, the economy can’t run away from its problems despite the efforts by the FOMC.

If you’re one of the many who figured the economy would immediately spike higher, or even the ridiculous assumption that Bernanke gave Obama a guarantee win in November, well, you probably spoke too soon. It may take a few quarters before the economy pierces the 4 percent GDP rate, and that’s assuming Congress can somehow get its act together re: The Fiscal Cliff.

I’ll say it again: the economy can’t run away from its problems despite the efforts by the FOMC.

We have seven trading days remaining in the month, and quarter, so the historical play is to look for “window dressing” to take place next week. Will it push stocks even higher? My guess is probably not.

First, the S&P 500 is already up almost 4 percent in September, and most of the run-up was a result of Fed expectations. Now, that the deal has been announced, and nothing else earth-shattering is scheduled, investors should expect downward pressure for the rest of the month. The only data point yet to roll out that may influence markets is the final read on second quarter GDP. But that’s quickly become irrelevant following last week’s move by the Fed.

The bottom line: Buyer Beware. Expecting instant riches as a result of adjustments to monetary policy would be irresponsible and dangerous. Look for serious volatility in the fourth quarter, especially if the upcoming earnings season disappoints the bulls and provides more octane for the bears. Either way, it’s going to be a class tug-of-war. Good luck!