Last week’s stock losses were partly a reflection of investors looking ahead to the two big news events on tap for this week: the Scottish independence vote on Thursday and the Federal Reserve (Fed)’s statement on Wednesday.
Here’s my take on what this week’s major events could mean for investors.
The Scottish Referendum. As I write in my new weekly commentary, over the past two weeks, several polls have suggested a realistic chance that the people of Scotland will vote for independence in this week’s referendum.
While the vote is obviously most important for the U.K., a vote for independence would have broader significance, particularly for the rest of Europe. Given that Scotland is typically more pro-European Union (EU) than the rest of the U.K., Scottish independence could raise the odds of an eventual EU exit by the U.K. It may also embolden other separatist movements, including that of Catalonia in Spain.
For now, I still expect a narrow victory for a continued union. However, a “yes” is certainly possible and would create massive uncertainty, both economic and political, for the United Kingdom and potentially the broader EU. At the very least sterling and other U.K. assets would likely come under additional pressure.
The September Fed Meeting Statement. Market watchers will be paying close attention to Wednesday’s Fed statement for signs of the timing of a Fed rate hike. Our expectation at BlackRock is that there’s a good chance the Fed will change its language, i.e. adopt a less accommodative stance, in next week’s statement, meaning an earlier-than-expected rate hike could be on the horizon.