Still, the two factors I cite above are likely to lead to modestly higher economic growth in 2014. This, in turn, has two implications for investors:
1. A combination of better data and less risk from Washington do suggest a greater likelihood of a December taper. That said I still believe an early 2014 taper is the most likely scenario. This view is supported by the fact that inflation continues to break to the low side (more evidence of that last week came from the November Producer Price Index report) giving the Fed more latitude.
2. Stronger U.S. growth is a positive for stocks, but a negative for bonds.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
Sources: Bloomberg