Skip to navigationSkip to content
Sponsor Content By 2013 iShares

December taper or not: 2 reasons easy money will likely continue

By gbaconqz
Published Last updated This article is more than 2 years old.

By Russ Koesterich, CFA
Chief Investment Strategist, BlackRock

Many market watchers are obsessed with when the Fed will begin tapering. However, those who expect the start of tapering to mean the end of easy money, and possibly of related market gains, are missing an important nuance. Russ explains.

As the Federal Reserve (Fed)’s December policy meeting approaches, many market watchers are obsessed with when the Fed will announce that it’s starting to scale back, or “taper,” its asset purchase program.

However, those who expect the start of tapering to mean the end of easy money, and possibly of related market gains, are missing an important nuance. While the Fed may start to taper as early as next month, the central bank will most likely maintain easy money policy by other means.

As I write in my new weekly commentary, there are two reasons why monetary policy is likely to remain accommodative for an extended period of time.

  • Low inflation. Given the still sluggish nature of the recovery, it should come as no surprise that inflation remains muted. Last week provided further evidence of the disinflationary trend, with U.S. consumer and producer price inflation decelerating to 1% and 0.3% respectively.

With growth uneven, the labor market fragile and inflation low, the Fed has significant latitude in how it adjusts monetary policy.  In fact, even while tapering, it can maintain accommodative monetary policy via other methods, such as through forward guidance on the path of short-term rates and potentially cutting the interest paid to banks on their excess reserves.

So what does this mean for investors? I continue to expect that short-term rates will remain low for long. Low rates, in turn, should help maintain high corporate margins, supporting the long-term case for stocks.

Russ Koesterich, CFA, is BlackRock Chief Investment Strategist and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.

Source: BlackRock Weekly Commentary, Bloomberg

This article was produced by iShares and not by the Quartz editorial staff.

—————

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Securities focusing on a single country may be subject to higher volatility. Index returns are for illustrative purposes only. Indexes are unmanaged and one cannot invest in an index. Past performance does not guarantee future results.

Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses, which may be obtained by visiting www.iShares.com or blackrock.com or by clicking the Prospectuses link above. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective. The information provided is not intended to be a complete analysis of every material fact respecting any strategy. The examples presented do not take into consideration commissions, tax implications or other transactions costs, which may significantly affect the economic consequences of a given strategy.

The information provided is not intended to be tax advice. Investors should be urged to consult their tax professionals or financial advisors for more information regarding their specific tax situations.
BlackRock does not provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.

This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., European Public Real Estate Association (“EPRA® ”), FTSE International Limited (“FTSE”), JPMorgan Chase & Co., MSCI Inc., Markit Indices Limited, Morningstar, Inc., The NASDAQ OMX Group, Inc., National Association of Real Estate Investment Trusts (“NAREIT”), New York Stock Exchange, Inc., Russell Investment Group or S&P Dow Jones Indices LLC, nor are they sponsored, endorsed or issued by Barclays Capital Inc. None of these companies make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with the companies listed above.

©2010-2013 BlackRock. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock. All other marks are the property of their respective owners.

📬 Kick off each morning with coffee and the Daily Brief (BYO coffee).

By providing your email, you agree to the Quartz Privacy Policy.