The second quarter of 2014 is likely to differ from last year in a couple of significant ways. We had positive momentum build in the first quarter of 2014; hopefully it will continue. What we may not have to worry about in 2014 is tapering, or the sudden rise of interest rates that occurred last May and June and threw the fixed-income markets into disarray. Now we have a scenario where we believe the Federal Reserve is going to modestly adjust its quantitative easing and provide us with a stable platform going forward with respect to interest rates.
What the Fed does in this next quarter matters because of expectations. Fixed-income markets were thrown into disarray last year because of the Fed’s prospects of tapering, i.e., the removal of a certain amount of quantitative easing from its policies. What the Fed does under Janet Yellen in the second quarter of 2014 will go a long way to determine whether we have stability in the fixed-income markets for the remainder of the year. Fed policies are key not only to the United States, but also to global stability in terms of fixed income.