Looking Ahead: September 17 through September 21, 2012

Stocks soared on news that the Federal Reserve is launching another round of quantitative easing. Whether profit taking will follow the beginning of this week remains to be seen. Besides the Fed action, the German Constitutional Court ruled in favor of the ESM — but with caveats. Data from China disappointed, showing weakness — especially in the country’s bilateral trade with the EU. This coming week appears to be calmer. The Bank of Japan meets. Expectations now are that the BoJ will expand its easing program, following the Fed. The major data are the flash purchasing managers’ indexes that will be released Thursday for China, Germany, France, the Eurozone and the United States. Investors also will be watching Japan’s merchandise trade data for new clues to global growth.

Looking Ahead: Week of September 10 through 14

The consumer sector has shown recent improvement—other than for employment. The week starts off and ends with consumer updates on consumer credit and with Friday’s retail sales and consumer sentiment. Europe is largely in recession and Asia is slowing, so Tuesday’s international trade report will provide news on the latest export numbers which are key to manufacturers. Higher food and energy costs have been threatening inflation numbers and this week’s PPI and CPI reports will provide updates. Finally, the Fed meets a day later than usual and traders will be closely anticipating some form of additional monetary easing when the Fed releases its statement just after noon on Thursday. Chairman Bernanke will be explaining the forecasts and any policy move at 2:15 p.m. ET Thursday.

Looking Ahead: Week of September 3 through 7

In a holiday shortened week, the highlight is Friday's employment report for August. This could be the turning point on whether the Fed eases further at its September 12-13 FOMC meeting. The consumer sector recently has shown signs of carrying more weight in the recovery and we will get additional updates with motor vehicle sales, ADP employment, and initial jobless claims. Manufacturing has been wavering, giving more importance to this week’s ISM and Markit manufacturing surveys. Finally, the construction sector has shown improvement and the construction outlays report will indicate if this trend continues.

Looking Ahead: Week of August 27 through 31

With the manufacturing sector wavering, investors are looking to the the consumer sector to boost the recovery. Key updates include personal income and spending along with consumer sentiment. Housing has shown some new life and Case-Shiller will update on home prices. There are mixed reviews on whether the Fed will implement QE3 at its September FOMC meeting, but this week’s Beige Book may offer hints. GDP gets revised but that is old news unless the revision is substantial. Fed Chairman Ben Bernanke speaks Friday at the Kansas City Fed’s annual Fed conference (internal Fed event) and he could hint at another round of quantitative easing.

Looking Ahead: Week of August 20 through 24

The recovery is gaining strength, albeit slowly. Housing finally is rising out of its recession rut and is on a modest uptrend. The consumer sector may not be retreating as feared.  However, manufacturing data have been unclear—this sector may or may not be flattening in the near term. But overall, the economy is doing somewhat better—although that fiscal cliff is still looming.

Housing permits were up in July. Reports on existing and on new homes will indicate if homebuilder optimism is justified. Manufacturing reports have been mixed and the July durables report may add clarity.  Notably, the mid-week release of Fed FOMC minutes could lift or dampen belief in a Fed move at its September FOMC meeting.

Reflection on traders and Olympians

Not unlike Olympians, investors must train themselves to control their emotions. This training begins with the development of an underlying macro philosophy one has of the market. This philosophy leads to a better understanding of one’s own risk tolerance. From there, investors can form an investment strategy and develop a set of suitable and sustainable investment rules (risk management). Lastly, but definitely not least, follow those rules. That’s it -- now perfect it!

Training, as much as it may seem like it, is not the most difficult part; the biggest challenge is accurate self-assessment. This is even more burdensome since no one likes to admit that they’re wrong.  “It wasn’t my fault, the market did so-and-so.”  But owning and learning from one's mistakes is a skill that -- if used, if understood, and if not discounted -- becomes the greatest tool an investor can have.

Looking Ahead: Week of August 13 through 17

The latest numbers were limited and mixed.  The best news was that exports are still growing.  This is good for the manufacturing sector.  The productivity numbers put company profit growth on the fence.  With unit labor costs trending low, a boost in output and revenues could lead to upside potential for profits.  But lack of output growth leaves profits languishing—bearing in mind that expectations for profits are rather low.

The consumer and manufacturing sectors have been wavering and we get news on those fronts.  The highlight of the week likely is an update on consumer spending with the retail sales report. Consumer sentiment also prints.  Manufacturing news posts with Empire State, industrial production, and Philly Fed.  Housing recently has shown modest improvement and the housing starts report could indicate if that trend continues.