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Headlines
- The US government's fiscal year-end influences financial markets, particularly interest rates and various assets, including the US dollar and gold.
- Seasonal patterns around the fiscal year-end can lead to increased stock market volatility, with mutual fund managers engaging in tax-loss selling.
- The Federal Open Market Committee (FOMC) is anticipated to adjust interest rates, with potential impacts on the broader economy and financial markets.
The fiscal year for the US government concludes on September 30, following the calendar year in which it started. For example, the 2024 fiscal year spans from October 1, 2023, to September 30, 2024. This period, known as "FY," followed by the year it ends (e.g., FY2024), serves as the accounting timeframe for federal operations.
This fiscal period is crucial as it directly impacts the financial markets and financial stocks, particularly through the federal budget process. The president, Congress, and federal agencies collaborate to draft the budget for the next fiscal year, shaping economic policies, government spending, and fiscal stability. The culmination of this process can create seasonal patterns in interest rates, which subsequently influence other asset classes.
Assets Impacted by the Fiscal Year-End
As the fiscal year concludes, certain financial assets may experience notable shifts. The US dollar might strengthen, driven by rising interest rates as government treasury prices drop. Conversely, gold could lose some of its appeal as an asset, given the higher interest rates. These shifts may also increase stock market volatility, with historical data showing a tendency for significant price declines during the fall.
September marks a period when mutual fund managers often engage in tax-loss selling, adding pressure to the stock market. This activity is part of a broader seasonal pattern that traders often monitor closely.
