Fed taper not likely in the cards for 2013

As the U.S. economy remains soft and uncertain, tapering by the Federal Reserve is now more likely a 2014 event.

Robert Johnson, CFA 19 October, 2013 | 9:27PM

After a lot of drama, the budget issues that caused the government shutdown and the debt limit crisis in the United States were pushed off until the New Year this week. Not settled--just saved for a later date. However, the market had assumed that for most of the week.

Instead, the real market movers this week were   Google  GOOG earnings, the Fed's dovish speeches and improved GDP news from China. Overall, the S&P 500 was up 2.4% on the week, making a new recovery high, with the Dow doing somewhat worse because of poor earnings from   IBM  IBM.

Bonds had a really great week with the softer Fed tone, weaker U.S. economic data and the avoidance of the debt ceiling issues. Ten-year U.S. Treasury rates fell to 2.59% after almost hitting 3% a few weeks ago. Better news out of China also helped along the previously faltering commodity markets. However, markets seem to be overlooking a soft economy and lacklustre corporate earnings.

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Robert Johnson, CFA

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis for Morningstar.

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