Q: What would be the pace of the tapering?
Russell Swansen: Everybody looks at whoever the Fed chairman is as though they set policy themselves, and they don’t. It’s voted on by the committee, you have a lot of turnover on the committee and you have probably a greater mix of [inflation] hawks coming on. So the perception may be that there’s less agreement on the committee than there has been in the past. I think there’s a good question of whether [and] how effective Janet Yellen will be at communicating.
John DeClue: I’m going to take the brighter side of that, you asked about Yellen. … She is number one, the best predictor of economic events of anyone [on the committee]. We may not get as much communication as we would want but it will probably be more crisp.
Erica Bergsland: I don’t think we’re in a normal environment. I think what you’re talking about with the taper is removing a distortion, not necessarily tightening … so I think the economy can absorb a taper … and I think the Fed will be very cautious in how they do it.
Elizabeth Lilly, portfolio manager, Westwood Teton Mighty Mites Fund and Gabelli Small Cap Fund: The tapering is not increasing interest rates, it’s just pulling liquidity out of the system. That’s a huge difference.
Doug Ramsey, chief investment officer, The Leuthold Group: Housing was an undisputed leader in the last cycle. Our view is that housing was, for a typical American, a far more pervasive bubble. Not as extreme maybe as the tech bubble, but it was a more pervasive bubble. And what we’re seeing now is sort of a typical post-bubble aftermath.
Q: In 2013, investors in the markets had a lot thrown at them: the fiscal cliff, sequesters, debt-ceiling debates, the government shutdown, and I think there’s more looming at the start of the year. Have investors learned to navigate these types of disruptions?
Jim Paulsen: A lot of what happened last year just has to do with the change in confidence that took place. Confidence went from postwar lows until about a year ago. Now it’s at five-year highs. And that move to me was about finally giving up the “Armageddon ghost.’’ We’re not giving up the idea we have problems and challenges … but we no longer believe that every new thing is going to be the end the world.
Biff Robillard, president and co-founder of Bannerstone Capital Management: We’ve been talking as if [the world] was going to end for years in financial circles, and I think it can be a powerful condition when investors slowly realize they made it. They got through the hard part, and I think that’s going to be a very important thing.