The Fed’s Taper Rehearsal

The talk is of tapering, and it’s making investors nervous.



Provided by Robert Warther, Warther Private Wealth


The Federal Open Market Committee (FOMC) released the minutes of its April meeting last week. The report suggested that should the economy continue to make progress, it may be time to adjust the pace of the Fed’s monthly bond purchase program. [1]


With inflation appearing to accelerate, this is the first sign that the Fed is considering such a scaling back. While such a change might be inevitable, it comes with no timetable and no indication that tapering is imminent.


This doesn’t calm investors’ nerves. The markets had a quick reaction to the tapering chatter, but soon resolved. Memories cast back to the so-called Taper Tantrum of 2013, when the Fed similarly changed direction after years of boosting the economy with easy money. Such mini-dips have happened from time to time since then. [2]


It’s important to keep in mind that these “tantrums” are typically the result of the Fed being inconsistent or undisciplined with its messaging. When the Chair or local Fed Chiefs speak, the market listens. When they say something that’s even interpreted as in a tapering mood, there’s an inevitable reaction.


Ultimately, the tapering will happen, though it's possible that it may not come for quite a while. It’s a bit like the Sword of Damocles, complete with the sound of a ticking clock. It’s also possible that a slip of the tongue could inspire days of turbulence between now and then.


In addition to its other duties, the Fed has been given the mandates of maintaining stable price levels and maintaining moderate, long-term interest rates. Your financial strategy has been crafted with the understanding that the Fed from time to time will make adjustments in interest rates to accomplish its goals. That said, whenever the news brings you questions or concerns, I welcome a chance to discuss them with you.


Robert Warther may be reached (239) 276-7939, or bob@wartherprivatewealth.com.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.


Securities offered through Independence Capital Company, Member FINRA/SIPC, a registered broker-dealer. Investment Advisory services offered through Warther Private Wealth, LLC, a Registered Investment Advisor ("RIA"), registered in the State of Ohio. Independence Capital Company, Inc and Warther Private Wealth are not affiliated. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. The information contained herein is based on sources we believe reliable but is not considered all-inclusive. Past performance is no guarantee of future results. Please contact your Financial Advisor with information regarding specific investments. Opinions are our current opinions only and are subject to change without notice. Generally, investments are NOT FDIC INSURED, NOT BANK GUARANTEED and MAY LOSE VALUE.


Citations

1. CNBC.com, May 19, 2020

2. CNBC.com, May 21, 2020

5 views0 comments

Recent Posts

See All