August made good on its historical promise to be a bad month for markets as they quickly sold off their early highs in a big way. The volatility index is creeping higher and the S&P 500 has fallen below key support levels. Conversely, gold and silver had a great month, but now look like they may be relaxing a bit.

With congress' decision on Syria, and the president's reaction and response looming this week, the near-term odds for a continued rally are fading. If our leaders agree on a limited strike, and Assad really is capable of setting off multiple powder kegs in retaliation, things could get ugly in a hurry. Even limited war in the Middle East would be all the excuse skittish investors would need to run to cash.

Softness in the labor markets continued with Friday's unemployment numbers. The economy created 169,000 jobs. Analysts expected 173,000. The unemployment rate dropped to 7.3% from 7.4% as 312,000 more people dropped out of the workforce. This is not the way we want to see the unemployment rate decline.

June and July jobs were both revised lower by a total of 74,000, and August's numbers would have been weaker if 17,000 government jobs hadn't been created at state and local levels. Further, the private industries that are hiring, Retail and Bars & Restaurants, are not those typically associated with high-wage jobs. One bright spot was the 14,000 manufacturing jobs created, which was the first positive number that area has seen in six months.

This weaker-than-expected employment news may force the Fed to re-evaluate their decision to scale back the bond-buying program and by how much. To review, the Fed has been buying $85 billion in government and mortgage-backed bonds each month in an attempt to spur economic growth and to keep interest rates low.

All the fear and speculation over the end of Quantitative Easing may be a bit misguided. If pumping over $1 trillion a year into the bond markets hasn't spurred economic growth, I don't think they're about to stop it. If they reduce the allocation to the bond-buying program a bit, they will likely turn right around and increase it elsewhere.

I would not be at all surprised to see new home or auto-purchase programs, or a bunch of new student-loan-forgiveness deals pop up. Government stimulus in any form is still stimulus. I maintain that when it's being done with borrowed money it is ineffective, but those who agree with me are not in a position to do anything about it, so for now, the Keynesians continue to try and spend their way to prosperity.

What does all this mean in the short-term for markets? The pressure on interest rates to rise is not quite as strong as it was which may help bonds a little. Continued stimulus (money printing) and low rates will keep the dollar weak and stocks rising. The Syria situation will not likely cause more than a brief selloff, but it could be violent.

Our global economic partners are also doing things to keep their currencies stable against ours so as not to upset delicate trade balances. The resulting, eventual inflation hurts those with the least amount of disposable income the most, and affords politicians more opportunity to "help" with further stimulus programs. This economic death spiral ends badly when the people lose faith in currencies.

To bring things to a quicker-than-usual close this month, this could be a very interesting couple of weeks in the world. We'll be watching and we are ready to make changes in our clients' portfolios if necessary. As always, please call or email if you want to talk about anything. Enjoy the cooler temperatures and we'll do this again in about a month.