Perspectives from Above the Noise – Week of August 26, 2013

3 Stories in the global economy that should not go un-noticed 

Uncertainty around the Fed’s tapering schedule drove much of market activity last week. While many Fed speakers have suggested that tapering may begin after the September FOMC meeting, they have cautioned that the Fed’s plans remain data dependent.

Markets ended the week mixed, showing an upward trend after the previous week’s losses, but still subject to investor nerves. For the week, the S&P 500 gained 0.46%, the Dow lost 0.47%, and the Nasdaq gained 1.53%.

Here are the 3 stories this week that rose above the noise:

Gold Rises amid Syria Fears, September Jitters 

Gold suffered severe losses through the first half of 2013, losing 27% of its value, but gold has rallied nearly 17% since its June 28 low. Gold has benefitted from a weaker dollar over the last two months, increased investor anxiety over the Congressional debt ceiling debates in September, and rising concern over the possibility that Syria is using chemical weapons on its own population. Gold is now over $1,400/oz. for the first time in nearly three months and could rally further if market volatility continues to rise, economic data weakens, or if a military intervention in Syria occurs.

Why Obama Is Being Pulled into Syria 

A potential military strike on Syria by the United States is weighing on capital markets recently, causing crude oil to rise over $3 today to $110 per barrel. An article by Gerald Seib of The Wall Street Journal reviews the recent history of U.S. policy in Syria with particular attention to the greater regional threat: Iran.

The United States has tried for years to contain Iran's development of nuclear weapons, with little success. President Obama has said it wouldn't be acceptable for Syria to use chemical weapons, just as he has said it wouldn't be acceptable for Iran to develop nuclear weapons. He now must ponder whether the credibility of the first statement will affect the credibility of the second.

Consumer Confidence Index in U.S. Increases to 81.5 

Confidence among U.S. consumers increased slightly in August, reversing a decline seen in the prior month. The Conference Board's index of sentiment advanced to 81.5 from a revised 81 the prior month. The August gains were driven by the Conference Board's measure of expectations for the next six months which rose to 88.7 from 86. However, the Present Situation Index decreased to 70.7 from 73.6. Consumers were moderately more upbeat about business, jobs and earning prospects.

Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.