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Alternative Market Briefing

Economists and fund managers question how long post taper decision euphoria can continue

Thursday, September 19, 2013

Beverly Chandler, Opalesque London:

Jon Mawby, manager of the GLG Strategic Bond and GLG Global Corporate Bond funds says there are too many tail risks to taper, commenting that while the Federal Reserve (Fed) decided not to taper asset purchases at the September meeting, indicating that whilst the economic data was improving, the quality and consistency of that data isn't robust enough to justify withdrawing the stimulus effect of quantitative easing (QE). Mawby writes: "Whilst the US unemployment rate is falling, it is more due to the declining participation rate rather than the quantity and quality of employment growing and improving. The rising rate environment, post the initial comments over the potential for taper, have also started to feed through to both mortgage rates and consumer confidence. This has started to impact the potential for the US economy to continue to build the momentum many market participants have identified as the beginning of the end for QE."

Mawby feels that, 'with a nod to the (potential) new Fed Chairperson Janet Yellení, the decision not to taper asset purchases this month may have removed a conflict of the current Federal Open Market Committee (FOMC) wanting to taper, whilst the new incarnation may have other ideas. "If this were the case, it would have caused even more confusion for markets, with the Bernanke Fed tapering and the Yellen Fed then reversing this po......................

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