{"id":9783,"date":"2021-08-19T12:53:16","date_gmt":"2021-08-19T12:53:16","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9783"},"modified":"2022-02-26T13:05:37","modified_gmt":"2022-02-26T13:05:37","slug":"when-will-the-fed-begin-to-taper","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/when-will-the-fed-begin-to-taper\/","title":{"rendered":"When Will the Fed Begin to &#8216;Taper&#8217;?"},"content":{"rendered":"\n<p><em>Dylan S. from\nNashville, TN asks: <\/em>Hello Mitch, I\u2019m curious to hear your thoughts on the\ntiming of the Fed \u2018taper,\u2019 which seems to be discussed every week. Do you see\nthe taper starting this year?<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for sending your question, Dylan. I think it\u2019s up in\nthe air when the Federal Reserve will begin tapering their monthly purchases of\nTreasury and mortgage securities, and it feels a bit hazardous to guess. But\nI\u2019ll lay out a few thoughts for you and readers regarding the taper and what it\ncould mean for markets and the economy.<\/p>\n\n\n\n<p>First, as it relates to the timing of the \u2018taper,\u2019 I would\nventure to say that the Federal Reserve views the current economic situation\nmore cautiously than we do. I see surging demand in the economy and strong corporate\nprofits, while the Fed seems to be more fixated on the unemployment rate being\nslightly higher than they want it to be \u2013 even though there are more available\njobs in the economy than there are unemployed people.<sup>1<\/sup><\/p>\n\n\n\n<p>__________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-8-retirement-mistakes?source=blog&amp;medium=website&amp;term=mitchsmailbox_blog_08_19_2021&amp;content=8_retirement_mistakes\">Avoid These 8 Retirement Mistakes!<\/a><\/strong><\/p>\n\n\n\n<p>In uncertain times, it can be easy for investors to fall\nprey to investing mistakes! These can be especially detrimental for those who\nare preparing for retirement. &nbsp;To help\nyou avoid these mistakes, we have created our guide <em>8 Retirement Mistakes\nYou Need to Avoid.<\/em> This guide will dive into common mistakes such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Is Your Portfolio Too Conservative?<\/li><li>Trying to Time Markets<\/li><li>Lack of Diversification<\/li><li>Not Knowing How to Adjust Lifestyle After\nRetirement<\/li><li>Switching Strategies Too Often<\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn\nmore, click on the link below to get your free copy:<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-8-retirement-mistakes?source=blog&amp;medium=website&amp;term=mitchsmailbox_blog_08_19_2021&amp;content=8_retirement_mistakes\">Download \u2013 <\/a><em><a href=\"https:\/\/go.steadyinvestor.com\/arrow-8-retirement-mistakes?source=blog&amp;medium=website&amp;term=mitchsmailbox_blog_08_19_2021&amp;content=8_retirement_mistakes\">8 Retirement Mistakes You Need to Avoid<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-8-retirement-mistakes?source=blog&amp;medium=website&amp;term=mitchsmailbox_blog_08_19_2021&amp;content=8_retirement_mistakes\">2<\/a><\/sup><\/em><\/strong><\/p>\n\n\n\n<p>__________________________________________________________________________<\/p>\n\n\n\n<p>I think the Fed\u2019s September 21-22 meeting will be the ultimate\ntell of when we can expect tapering to begin. By that meeting, the federal\nunemployment expanded benefits will have ended, and we will have some data showing\nhow the labor market\/hiring is holding up as the Delta variant spreads. A\nstrong hiring report could put some pressure on the Fed to start tapering\nperhaps by the end of the year, if not early next. <\/p>\n\n\n\n<p>As for what to expect from the markets and economy, we do\nhave one historical reference point we can look to \u2013 the Fed taper that started\nin December 2013 and lasted 10 months. Many can easily recall the \u201ctaper\ntantrum\u201d narrative that accompanied the reduction in bond purchases, and there\nmay be an assumption etched into folks\u2019 memories that it was a bad time for\nstocks. But it wasn\u2019t. Volatility was a factor, but the market\u2019s trajectory\nremained positive:<\/p>\n\n\n\n<p><em>S&amp;P 500 from\nDecember 31, 2013 to December 31, 2014<\/em><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/3_pic1-3-1024x395.png\" alt=\"\" class=\"wp-image-9784\"\/><figcaption> <strong><em>Source: Federal Reserve Bank of St. Louis<sup>3<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>In my view, the main reason tapering matters is because of the effect it could have on interest rates. The Fed\u2019s Treasury and mortgage purchases have artificially put downward pressure on long-duration bond yields, and removing the purchases may allow the longer end of the yield curve to float higher. Tapering also moves the Fed one step closer to hiking the fed funds rate, all of which translate to higher interest rates in general. The expectation of higher interest rates can put pressure on stock prices, particularly names that trade at high valuation multiples, like Tech. \u00a0<\/p>\n\n\n\n<p>Time will tell, but I do agree these are important\nindicators to watch. I do not necessarily think tapering and pushing the fed\nfunds rate higher will spell doom for this cycle, but it very well may open the\ndoor for higher levels of volatility and a rotation away from high valuation\nnames. Investors should keep that in mind.<\/p>\n\n\n\n<p>Investors should also become aware of common investing\nmistakes when planning for their financial future. Especially for those who are\nnearing retirement, we believe that there are eight common retirement mistakes\nthat investors should avoid. <\/p>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn\nmore, click on the link below to download our latest guide: <em>8 Retirement\nMistakes to Avoid<sup>4<\/sup>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Mitch offers his perspective on when the Fed will begin to taper its Treasury and mortgage security purchases<\/p>\n","protected":false},"author":3,"featured_media":7436,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-9783","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9783","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9783"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9783\/revisions"}],"predecessor-version":[{"id":10333,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9783\/revisions\/10333"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9783"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9783"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9783"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}