“We have some short-term issues to deal with on tapering, but long term we’re constructive because tapering will really come at the result of economic data being self-sustaining,” Dan Veru, the chief investment officer who helps oversee $4.5 billion at Palisade Capital Management LLC, said in a phone interview from Fort Lee, New Jersey.“ My personal view is that they’re not going to taper yet. It’d be an odd time of the year to announce a significant reversal of policy like this because markets tend to be more vulnerable this time of the year, less liquidity, less trading volume.”
The central bank has said it will hold its target interest interest rate near zero “at least as long as” unemployment exceeds 6.5%, so long as the outlook for inflation is no higher than 2.5%. Unemployment fell to a five-year low of 7% last month, while inflation is running below the Fed’s target of 2%.
Three rounds of Fed bond buying, also known as quantitative easing, have helped propel the S&P 500 to a rally of more than 160% from a 12-year low in 2009.
U.S. stocks will rise as much as 5% while bonds decline in 2014 as the Fed reduces economic stimulus, Douglas Ramsey, chief investment officer at Leuthold Group LLC, said in a Bloomberg radio interview today. Ramsey said he’s bullish on large technology and health-care companies and predicted that shares of small companies will underperform next year.
Companies buying their own stock make up more of the U.S. equity market than ever before, underpinning share values even as the Fed prepares to reduce stimulus.
Stock acquired under company repurchase programs represented 6.4% of daily trading in the Russell 3000 Index by value through Sept. 30, exceeding 2007’s level of 4.1%, according to data compiled by Bloomberg and Birinyi Associates Inc. The proportion of trading is higher even as chief executive officers spend $343 billion less on buybacks so far this year, reflecting a seven-year decline in equity volume.
Apple Inc. to Walt Disney Co. and International Business Machines Corp. took advantage of record-low interest rates to raise an unprecedented amount of debt financing and repurchased stock, helping boost per-share U.S. earnings for four years. With cash at a record, buying by companies is poised to continue in a bull market that is about to enter its sixth year.