One big thing you may have heard about in the headlines is the Federal Reserve's hint that it might start "tapering" soon. (1) Could the Fed's actions cause a correction or economic slowdown?
Let's discuss.
First of all, what does ”tapering” mean? In econ-speak, tapering means winding down the pace of the assets Fed has been buying since last summer.
Why is it a big deal?
Headlines are looking grim again, so let's pause and take stock. Why are the headlines terrible?
Because the media loves drama. This is not news to you or me or anyone who pays attention. The 24-hour news cycle is there to whip up emotions and keep us glued to the latest "BREAKING NEWS."
So, what’s behind the noise and should we worry?
Before we jump into unpacking the news, let’s take a moment and remind ourselves of how far we’ve come since the pandemic began. You can see it right here in this chart:
What happens when the predictions are wrong? Is it time to panic? Is it time to ditch our strategy?
It's a fascinating question because it cuts right down to the question of what it means to live in an uncertain world.
Humans are wired to dislike uncertainty. (1)
And we’re used to a fair amount of (often unwarranted) certainty in the models and paradigms we use to make sense of the world around us. We’re so attracted to certainty that when economic forecasts and reports come back with “surprises” (also known as being wrong), we tend to freak out.
Have you seen the headlines about inflation? Are you concerned?
What do you need to know about inflation? And what should you do about it?
Here’s a quick video that discusses inflation and gives you 3 things to think about.
