Ben Bernanke had one last present for Wall Street before exiting as chairman of the Federal Reserve, announcing that the central bank will initiate a $10 billion monthly taper of its bond buying program starting in January. The market, which was quiet on announcement day, spiked on the news, sending the Dow up over 200 points, and the upward trend continued right through today.
With the first concrete step of a taper taking shape after months of speculation, investors seemed to breathe a collective sigh of relief. They were further soothed by the Fed’s assurances that it will not be in a hurry to raise rates, even while unemployment moves lower and the economy continues to improve.
That could be enough to keep stocks buoyant over the remaining weeks of 2013, but with policy uncertainty finally removed, investors are likely to now turn their attention to earnings and economic growth. That means the market will face a real test when we get the first earnings reports in January, and also as late-year consumer numbers trickle in.
While some volatility is inevitable after this year’s incredible market run, the economy continues to strengthen, and with the Fed expecting a firming landscape ahead, I still see new opportunities for us that will benefit from improving industry data. Let me share one with you now.