U.S. stocks were solidly higher in recent trading but financial markets remain on tenterhooks ahead of today’s Senate Foreign Relations Committee vote on whether or not to authorize strikes against the Syrian government. The most notable action so far Wednesday is in commodities, which have risen sharply in the run-up to military action against Syria; oil and gold were down more than 1% while silver was off 3% in recent trading.
On Tuesday, stocks rallied sharply until House Speaker John Boehner expressed support for military action against the regime of Bashar al-Assad. After racing toward 15,000 ahead of Boehner’s comments, the Dow quickly retreated and ended the session up a modest 23 points at 14,834.
In the accompanying video, I discuss the impact the debate over Syria is having on stocks with Todd Harrison, CEO of Minyanville.com and a former hedge fund trader.
“Certainly Syria is front and center but it’s more reason to the rhyme right now,” Harrison says. “The market broke down technically in August” and thus is more vulnerable to geopolitical jitters.
“The bears have a window to knock the market down,” Harrison says, citing the S&P 500’s 200-day moving average at 1565 as a potential downside target. “That’s where I think it’s going,” the trader says, adding that it would be “a first stop” if a more pronounced downturn unfolds.
Given September’s historic track record as the worst single month for stocks, as well as recent chatter about the ominous-sounding Hindenburg Omen, a lot of folks are braced for more downside in the coming days and weeks.
That said, Harrison believes the “window” for the bears won’t stay open for long.
“If [the bears] don’t get their act together soon we’ll see some performance anxiety into year-end,” he says, referring to the concept that the only thing worse for professional money managers than losing money is not making as much as your peers.
“It’s the backward world of ‘other people’s money’,” Harrison explains. “If you make money and other people make more, it’s anathema. If you lose and other people lose more that’s fine.”
Given most professional fund managers have trailed their benchmarks – typically the S&P 500 for equity funds – every year since the bottom in early 2009, “performance anxiety” may prove to even more powerful than “geopolitical anxiety” in the weeks ahead.
- Todd Harrison