As the stock market heads into the final stretch of what has been a very strong 2013, all eyes will be laser-focused on the Federal Reserve this week.
The central bank wraps up a two-day policy meeting Wednesday and investors want to know whether it will finally announce that its ready to pull back on, or taper, the massive bond buying program that has helped fuel this year’s mega-rally on Wall Street.
It looks like it could go either way. Analysts at Berenberg Bank wrote in a research note Friday that they see a 50% chance of tapering. Of course, that means there’s also a 50% chance the Fed will do nothing.
The Fed has been purchasing $85 billion in Treasury bonds and mortgage-backed securities per month, a program known as quantitative easing or QE for short, since September 2012. This is the third round of QE since the financial crisis of 2008 and many investors believe that QE is the main reason the market has soared since stocks bottomed in March 2009.
Stocks went on a wild ride in May, when Fed chairman Ben Bernanke first hinted in that the Fed may taper “in the next few meetings.”
