The market could be experiencing a change in character that marked the good news is good news and bad news is good news market for the past several months. The potential for a catalyst to rattle the markets was there and looks like the emerging market complex is set to deliver such a catalyst to the US equity markets. It of course remains to be seen whether this is just a temporary blip in an ongoing march higher by the markets or whether it develops into something that proves more troubling, similar to what happened in 1998. Unfortunately we don't have any certainty on this matter, but we suspect to will fall somewhere in between the best case and absolute worst case scenario.
The Fed continues its plan to taper asset purchases by another $10 billion per month. The committee expects to continue the taper process for the balance of the year bringing asset purchases to zero by the end of 2014. We suspect this liquidity drain out of the system will impact the economy as well as the stock market in the coming months. 2014 is setting up to be an interesting year.
