At Wednesday’s Federal Reserve announcement, policymakers are widely expected to begin to scale back (taper) monthly purchases of Treasury and agency bonds from $85 billion to perhaps $70 billion or so.
Such a change would be minuscule compared to the huge stock of outstanding Treasury and agency bonds or to daily trading volume. Yet many analysts fear that even so trivial a change must be ominous for stockholders, even though the Fed pledges to keep short-term rates near zero.
As one financial columnist recently put it, “worries focus on what will happen to stocks as that stimulus begins to shrink.”