Tags: Hughes | Fed | taper | stocks

Sun America's Hughes: Investors No Longer Fear Tapering

By    |   Tuesday, 10 December 2013 07:39 AM

If the Federal Reserve decides to taper its stimulus, it won't affect the markets much. At this point, investors don't really care, industry professionals say.

Confidence and economic data are moving in a positive direction. Last week, the Bureau of Labor Statistics released a better-than-expected jobs report, which revealed unemployment dropped to 7 percent. Though many believe this provides more basis for the Fed to taper, the markets moved higher on the news, suggesting that investors no longer fear less accommodative monetary policy.

"I think the fear now is missing a potential upside move in the market [more] than a downside correction," Heather Hughes, regional vice president of Sun America Financial, tells Yahoo.

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"The path of least resistance seems to still be to the upside, especially during the holiday season, you have the seasonal bias," she adds.

Hughes notes that $1.4 billion flowed out of U.S. mutual funds last week as money continues flowing into international equities. So investors are still moving their capital, but its not all being invested here in the United States.

Though she believes market participants need some clarity out of Washington and from the Fed, she does not believe tapering will have the same profound impact that was expected in the past.

"We've already had six months of Fed taper news and the stock market seems to have priced that in. The bond markets may throw somewhat of a temper tantrum, if and when we do taper," she argues.

To be sure, 10-year Treasury yields are already creeping up and Hughes says yields could reach 3 percent by the end of the year.

But for the most part, no one really cares about the tapering issue anymore, "because it's kind of played out," she explains.

Thomas Lee, JPMorgan Chase's chief U.S. equity strategist, believes the Fed could taper in January after reviewing this month's economic data and assessing holiday spending. But whenever it happens, he also expects investors to shrug off the news.

"I think a few weeks ago investors would have been pretty concerned about the idea of taper because I don't think the data really gave them comfort that the economy was at escape velocity," he tells CNBC.

"But with Friday's jobs report and some of the other ones we've had recently, you know, I think investors are getting comfortable, if it does happen in December," Lee adds.

Lee still sees some "performance chasing," and overall, he expects investors to try to finish this year strong.

Data, such as positioning in hedge funds and mutual funds, show investors are taking off risk, which is usually a contrarian bull indicator, Lee notes.

"If people are taking off risk now, it's more likely for the markets to rally because what you have is some capital being put on the side."

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If the Federal Reserve decides to taper its stimulus, it won't affect the markets much. At this point, investors don't really care, industry professionals say.
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2013-39-10
Tuesday, 10 December 2013 07:39 AM
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