Investors have reached the last opportunity for 2014. With fourth quarter upon us, investors are tempting to figure out how they should adjust their portfolios. The year has been choppy and full of uncertainties. One of the rockiest months for investors was September. For September, S&P 500 had a decline of 1.6%. Overall, there was a gain of 6.7% for the year-to-date.
The remaining part of the year is largely depended on the investors’ reaction. Will they become more optimistic about the returns for future stocks or will they continue to be skittish. When you include the conflict with Russia and the Middle East, the ability for investors to make decisions isn’t any easier.
These are some key areas that investors have to battle with, when determining the possibilities for the last three months of 2014:
Volatility: What has continued to grow in popularity is the S&P 500 implied volatility, which was measured by CBOE’s Volatility Index and have a gain of 2.07%. Overall, there was a gain of 34% for September. In the months and weeks to come, most analysts believe that the volatility will grow even higher.
Macro: Investors don’t believe the Federal Reserve is going to change course. It appears that the rising rates are certain to continue, which has happened in a long time. The stock markets are predicting the initial rate hike to happen in June 2015. At the same time, investors will be keeping a close eye on the economic reports, because the Fed is data dependent. The markets could possibly have a second experience of taper tantrum, if the Fed has a surprise.
Dollar: The increase in the U.S. dollar’s strength was the highlight of September. Going against the yen and the euro, the dollar obtained multi-year highs. Also, its index (DXY, +0.15%) reached a four-year high. Consensus believes that the slowing economies in foreign countries is the primary reason for the dollar’s growth.