Majority of fund managers expect tapering in March 2014

The majority of investors expect the Fed to begin tapering QE in March next year, according to research from Bank of America Merrill Lynch.

The Fed previously stressed that “there is no fixed calendar” for when it will begin pulling back on QE as part of an announcement in September, contrary to widespread expectations that tapering would begin that month.

Since then fresh speculation has emerged as to whether the Fed may instead look to start tapering at its December meeting or possibly in March 2014, when current Fed vice chair Janet Yellen will take the helm as Fed chairman.

The BofA ML fund manager survey for November asked global fund managers when they expect the Fed will begin reducing its bond-purchasing programme between the dates December 2013 through to 2015 or later.

A 48 per cent majority of managers believe tapering is most likely to start in March 2014 in line with Yellen’s appointment as Fed chairman, while only 21 per cent of managers overall expect the Fed to introduce QE tapering before this date.

However 18 per cent of investors also expect it will take place later in the second quarter of 2014.

The survey also show as concerns over the US government shutdown and debt ceiling debate in October subsided, investors’ attention shifted to potential tail risks from China and commodities.

Fears over a hard landing in China and commodity collapse have increased from October into November and is now considered the biggest tail-risk by managers.