Have you ever heard the phrase "It's a headline risk for the markets?"
What is Headline Risk?
Headline risk is the possibility that a disturbing news event—whether predicted or unexpected—will increase market volatility.
As Congress works to enact a budget package by October 1 for the fiscal year 2024, you should be prepared for some "headline risk" in September.
The House of Representatives still has an extensive amount of work to do and only a very small window of time to finish it, but the Senate has completed the majority of its work for the new federal spending plan. By September 12, House members should be back in Washington, DC. Remember that it's possible a temporary bill can also pass.
Risk in headlines is nothing new. In the weeks leading up to Fed Chair Powell's speech at Jackson Hole in August, the market was on edge. Additionally, it appears that the market "holds its breath" before each monthly news on inflation.
Nobody wants a recurrence of the high-profile, high-stakes debt ceiling negotiations that took place in May 2023 between politicians. The ebb and flow of news kept the stock market in check, plunging when negotiations stalled and increasing when a deal appeared near.
Given that Wall Street is still recovering from the debt ceiling negotiations, we anticipate that Congress will reach an agreement this time around with little fuss. We certainly hope that's how the budget talks proceed.