2013 was a year of anticipation and perhaps disappointment. For those hoping the 2012 election would have settled some of the dysfunction in Washington, that did not happen. In fact, we doubled down on fights already settled as if there were no new business. Equity markets impressed, but few saw it as anything other than the hand of the Fed. Mercifully, the Fed signaled the beginning of the end of QE3 by year-end.
The political impasse in Washington and wrangles over the U.S. debt ceiling, which is leading to a gradual shutdown of the US government, is yet to seriously rattle market sentiment, but the longer it carries on the greater the risk of extreme market volatility.