U.S. stock indexes fell on Friday as the September 30 deadline for an emergency budget deal in Washington to avoid a Government shutdown loomed ever closer.
Is it correlation or causation? Tough call. The way McSherry puts it in the Forbes article, one thing happens as another thing happens. Sounds like correlation, right?
But it was more company-specific issues that affected many stock prices on Friday.
McSherry provides several supporting examples following that last statement. I would think rational-sounding answers replete with performance figures, even bad ones, would do more to placate nervous shareholders. Bad figures are things that management can do something about. The last thing shareholders want to hear is that their investments are entirely at the mercy of a capricious DC establishment engaged in a junkpunching contest.
Stocks fell on Friday as investors focused on the risk that the U.S. government won’t be able to pay all its bills after hitting its borrowing limit next week.
Joshua Freed at Salon disappoints with his assessment. He tentatively lets out a whiff of concern, as though in a crowded elevator. “As investors focused on risk,” sounds scary. Just like a crowd in an elevator, however, failing to cite any of those investors provides some plausible deniability. He spends the rest of the article making correlation statements and providing examples just as Forbes did. Could it be that the headline is just editorial click bait?
Hold on. With a somewhat different byline, that same Joshua Freed, on the same day, did a marginally better job for ABC News, just as an AP Business Writer. We find a statement similar to the one at Salon:
Investors focused on the risk that the government could shut down on Tuesday unless Congress agrees to a new spending bill.
This time Freed seems to have picked up a phone or read a press release or something, because he here includes a nebulous statement from an industry insider:
“I don’t know what’s going to happen 15 minutes from now,” said Stephen Carl, head of equity trading at The Williams Capital Group. He noted that volume on Friday was low, suggesting that some investors were waiting for more information.
We’re led to a conclusion, but which? What is this “more information” on which investors are waiting? “Suggesting,” however suggests a certain degree of tea leaf reading. The rest of the article continues to trade in correlation statements.
JeeYeon Park appears to do a much better job of sinking teeth into the speculation.
“It looks like we’re going to have a [government] showdown on Monday and a showdown on Monday is a problem for traders and portfolio managers as it’s the end of the quarter,” said Art Cashin, director of floor operations at UBS Financial Services.
“If you believe as I do that somehow or another this government shutdown issue will be resolved before, on, or a little after the cutoff date, you may want to consider nibbling on the long side if the S&P goes down to the 1,670 area,” wrote Elliot Spar, market strategist at Stifel Nicolaus.
“It’s hard to forecast the behavior of politicians—but part of the negotiating tactics in these situations seems to be taking it to the eleventh hour,” said Lawrence Creatura, portfolio manager of the Clover Small Value Fund at Federated Investors. “We’ve faced times like this in the past and the sun rises again over the stock market [emphasis added]—so often times, the barks surrounding these events are much worse than the eventual reality…but in anticipation of the choppiness, investors can go into the defensive sectors.”
There is one funny omission from those four articles, an omission that would go far, perhaps, to explaining what information investors might be waiting for with bated breath.
The Federal Reserve uses that data to help determine whether to start reducing its bond-buying program.
I could keep searching the tea leaf readers all night and all day and probably just end up bouncing from one conclusion to the other. Ultimately, I follow my gut. My gut says that Park and other writers cut from the same cloth are on the money. They bother to check with multiple figures in the marketplace, and those professional prognosticators are likely going to be looking at the same clues and using the same keywords in their readings, to wit: past performance is no guarantee of future performance, wink wink, nudge nudge.
If my guess is right, now that the plutocrats and their cronies in office know with increasing confidence that this cycle works we can expect shutdown threats right and left (pun intended) for just about any reason at all. We’ll continue to face these farcical battles because the stock market seems to react like it just did, at least for a while, pretty much as Creatura indicates. What a great time to invest at bargain rates, especially if you’ve got bags of money just laying around! I’m not even sure elections matter. No elected official on the take will care about getting voted out so long as they are assured that the next round of crooks through the turnstile will keep agitating for bargain basement investment opportunities.
Image credit: Barbara Lock, in the public domain.
Cross-posted from Ars Skeptica.