Major averages are firmly in negative territory for the month of September following Monday’s sharp sell-off. The S&P 500 index fell 1.7%, its largest daily loss since May of this year. The sell-off was partly due to market fears over the China property developer Evergrande, one of China’s largest real estate developers with a debt burden of around $300 billion. Evergrande is due to make significant interest payments over the coming days and the markets largely expect the company to miss these payments. In an effort to reassure investors, the People’s Bank of China’s injected 90 billion yuan to the banking system, signaling support for markets as they braced for what is expected to be one of China’s largest-ever debt restructurings (Reuters). In the short-term, the markets seem to be looking past China and ahead to the outcome of the two-day Federal Reserve meeting on Wednesday afternoon. Investors will be tuned in for any potential timeline for tapering stimulus and any shifts in expectations for interest-rate policy. Meanwhile, the potential for a government shutdown late next week is becoming an increasingly plausible threat, with no near-term signs of progress towards the Senate approving a debt-ceiling hike. For millions of Americans, the timing of their federal checks, including everything from child tax credits to Social Security, will be hanging in the balance. Bond yields traded lower this week in a flight-to-safety trade, with the yield on the 10-year Treasury note trading around 1.32%.

Source: GSAM, Daily Upside, JPM, Factor Investor

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