The Markets’ Mood, September Edition

September can have a back-to-school feeling on Wall Street and a couple of news organizations put out stories in recent days that take stock of investor sentiment. They highlight some trends worth watching.

In a Reuters story reporter Angela Moon looks at volatility. September is traditionally the most volatile trading month of the whole year, and Moon finds that indeed investors have stocked up on options to protect against radical gyrations.  Traders tell Moon the “datapalooza” coming this week will be important to watch. Including:  retail sales due on Tuesday, industrial production and capacity utilization on Wednesday, the Producer Price Index and jobless claims on Thursday and the Consumer Price Index and University of Michigan/Thomson Reuters consumer confidence on Friday.

At the Wall Street Journal Tom Lauricella and Mark Gongloff describe “A New World Since Lehman’s Fall” laying out a host of different investor concerns that have played out under the shadow of the once-great investment bank’s demise.

One result: some investors are moving into Emerging market debt and equity for growth,  echoing the moves Harvard’s Endowment has made toward beefing up its emerging market stock holdings:

U.S. financial stocks, at the epicenter of the crisis, remain nearly a third lower than where they were two years ago. And since August 2008, investors around the world have pulled $203 billion out of developed-market stock funds, according to EPFR Global. That is 8.5% of the $2.4 trillion that were in developed-market stock funds at the time.

Instead, investors are gravitating toward emerging markets. That isn’t because they want to take on risk. Those economies, with lower debt levels and strong outlooks, are now seen as having taken on the role of driving global economic growth from the hobbled developed economies.

Another insight: The Fed’s purchases of $1.55 trillion of  U.S. mortgage-backed-securities and Treasury-debt over the past eighteen months has helped fuel the rally in corporate bonds too.

photo: James Lee

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