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Investing Specialists

Tapering in September--Not So Fast

A poor August employment report may remove tapering from the agenda for now, but investors should be careful what they wish for.

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Markets bounced up and down most of the week with little change by week's end. Europe's economic data looked better, while news out of China and the U.S. was mixed.

The news at the beginning of the week was good enough to convince market participants that the tapering of the Federal Reserve's bond-buying program was at hand. Even the Fed minutes released on Wednesday seemed to suggest that the economy was on the path that the Fed anticipated when it announced that its tapering program might end soon after its June meeting (though that was before a patch of soft economic numbers was released). The 10-year U.S. Treasury bond soared above 2.9% before backing down on Friday. Tapering threats also continued to hit emerging markets hard. Investors have begun to pull funds out of emerging-markets countries, which has depressed many currencies (notably India and Brazil), in turn causing a spike in inflation and slower growth in those regions.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.