The Worst Month Starts off Strong

September is, at least historically speaking, the worst month of the year for the stock market. This year, however, stocks have shaken off the immediate uncertainty generated by a potential U.S. military involvement in the Syrian civil war, as well as the pending uncertainty about the Fed’s decision on “tapering,” and the result has been a nice start for the bulls.

In fact, the S&P 500 has been up six days in a row. If the market closes higher today, it will mark seven straight days of gains. The benchmark measure of domestic stocks also will have been up eight of the last nine days, if we close higher on Wednesday (the S&P was up about 4 points midway through Wednesday’s trade).

After President Obama’s address to the nation last night on the Syrian situation, the markets are basically betting the issue is at least temporarily resolved. And while we still could see some pressure on stocks if the situation heats up again, for now the issue is off of the front burner.

Of course, the biggest unknown facing the markets right now is the Fed and its pending decision on monetary policy when it meets on Sept. 18. Most Fed watchers, including me, think there will be some type of tapering announced after the Federal Open Market Committee (FOMC) meeting concludes on Sept. 18. The real unknowns, however, are over what the specifics of tapering will be, as well as the timing of the taper.

As for specifics, what the market fears most is a lack of clarity about how the tapering process will unfold. The hope here is that if the Fed does indeed taper as expected, then Chairman Ben Bernanke will use the press conference held after the FOMC announcement to provide specific details on the pace of tapering, the type of tapering and the amount of tapering.

Once the news is out on what the Fed is actually going to do, we should get a lot more stability in both the equity and bond markets, and that should give us a much clearer sense of where things will go from there.

The other Fed-related unknown confronting the market is who will take over the reins as Fed chairman after Ben Bernanke retires. For a long time, it was sort of assumed that Fed Vice Chairman Janet Yellen was a shoe in for the top slot. Now, however, the smart money has former Treasury Secretary and current presidential adviser Larry Summers as the leading and most-likely candidate.

There are some concerns with the Fed’s succession on Wall Street, as Yellen is viewed as the clear choice from a smooth post-Bernanke transition. Summers definitely is more of a wild card. As such, Wall Street is a bit more nervous about him becoming the world’s most-powerful central banker.

Hopefully, we’ll know the answers to these unknowns soon enough. When we do, it will set the stage for the final quarter of the year. So, which areas of the market represent the best buying opportunities going into the final quarter of 2013?

To find out what sectors I’m watching right now, and more importantly, to find out when to buy those sectors, I invite you to check out my Successful Investing advisory service today.