US stock market faces looming judgment day

The time for waiting is now done with. After a two month surge on the part of the US stock market, the day of reckoning is almost upon us. Some investors, having put their money where their mouth is, will now see if they got their hearts deepest, darkest, desire; an increased say for the Republicans in the White House and loads of money for nothing. The American stock market have factored in the Republicans winning more seats thanks to the mid-term elections and many investors have their fingers crossed over this as it is a prospect that will be received as being largely business-friendly. Couple that with the Federal Reserve pumping billions through quantitative easing and purchasing Treasury debt and you will understand just why it is the final countdown for many that have invested themselves in this scenario.

Tuesday is the day we understand the power-play of politics and just how it has panned out and Wednesday is the day that the two-day policy discussion of the Fed draws to an end. The effect will be two-fold, an economic and political stimulus plan revealed, and the stock markets are looking on with bated breath and a great deal of anticipation as they find out which way the pendulum has swung. With the unemployment rate dangerously high, Republicans and Democrats are bound to use it as a part of their messages in these midterm elections. There was a job loss of 95,000 jobs in September, but there is expected to be a gain of some 60,000 jobs in the month of October thanks to the non-farm payrolls report, which is set to be released by the government on Friday. Even so, unemployment is holding firm at 9.6%.

Investors need something to coo about, and they’re just not getting that right now. A steady flow of strong economic indicators and strong showings by S&P 500 companies will go a long way towards boosting consumer and investor confidence. But even if these numbers are seen as positive for the market, it will be very hard for it to overshadow the sheer importance of the midterm elections and the Fed meeting. There are so many permutations and combinations on show that Wall Street doyens are hesitant to make a call and pick a way that the market is going to swing. The only thing that can be said with absolute surety about the US stock market is that it will be volatile and it will be wild.

Depending on how things go, there could be a 2.5% swing in either direction and while that is not extraordinary in itself, traders could see significant volatility based on how the future unfolds. There are just so many variables that volatility is a given in this scenario. Expect things to explode into life once the Fed makes its announcement, and it will be the fuse that sets off the markets that are expected to be quiet until that announcement comes through. The US stock market is sitting on a powder keg and if the election results and Fed announcements align, expect there to be an explosion of activity like you might not have seen in the previous months. This is going to be one nonsensical November.