4 Ways Congress Could Move Markets In September

When the U.S. Congress returns from its summer recess in September, it will face four major market-moving issues right out of the gate.

On Thursday, Bank of America economist Joseph Song highlighted four issues that could move the SPDR S&P 500 ETF Trust SPY in September.

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Reconciliation And Infrastructure

1. The House of Representatives will draft a reconciliation package to fund President Joe Biden’s $3.5 trillion domestic spending plan. In particular, the Ways and Means Committee is scheduled to meet for four days starting on Sept. 9 to potentially draw up changes to the tax code.

2. House Speaker Nancy Pelosi has promised a vote on the bipartisan infrastructure bill no later than Sept. 27. Progressive Democrats have threatened to withhold their vote on the infrastructure bill until the vote on the reconciliation package is complete, which could potentially create some drama and market volatility.

Funding And Debt Ceiling

3. Congress must agree on a full fiscal year funding package or the government will shut down on Oct. 1. Previous funding package talks stalled, and Democrats will need at least some bipartisan support in the Senate to overcome the 60-vote filibuster threshold.

4. The U.S. debt ceiling was reinstated on Aug. 1, and the Treasury Department has since been using its cash balance and other “extraordinary measures” to finance the federal government. Republicans have vowed not to raise the debt ceiling without spending cuts or other Democratic concessions, and Song said the Treasury’s cash balance will likely be depleted sometime between mid-October and December.

Song said Bank of America will be watching each of these four key issues as they play out in Washington over the next several weeks.

“Negotiations around the reconciliation package and the infrastructure bill will be especially important as we try to better understand how new spending and taxes impact our outlook,” he said.

Benzinga’s Take: Wall Street typically ignores much of the circus in Washington surrounding funding, the debt ceiling and potential government shutdowns. However, changes to tax policy can have major implications for corporate earnings, so the details about potential tax policy changes may be a significant market catalyst.