Fed decision no turning point for markets

Although the timing of the Fed’s decision to taper its asset purchases came as surprise to the majority (although not to us), the announcement has not proved so far to be the turning point for markets that some have suggested. On the contrary, the stock market has rallied, while long-term Treasury yields have barely budged. Given the still benign outlook for US monetary policy over the next couple of years, this sanguine response is a logical one that sits comfortably with our own forecasts.