Which assets will prove resilient to Fed tapering?

The Fed now looks as if it will start to scale back its asset purchases next spring, although the tone of the FOMC's late-October statement suggests that the process might even begin earlier. As the central bank gradually becomes less accommodative over the next couple of years we expect government bond yields to drift higher and the dollar to rise. By contrast, investors' appetite for "risky" assets is likely to wane. In general, though, we do not expect the prices of risky assets to fall back sharply given that monetary policy elsewhere is set to remain highly accommodative. Moreover, the Fed itself is likely to tread very cautiously and not raise its funds rate until 2015.