18 December 2013: The Fed begins tapering
The Federal Reserve announced it would start reducing its monthly bond purchases from $85 billion to $75 billion, the first step in winding down quantitative easing. Investors had panicked earlier in the year when the Fed merely hinted at this, an episode called the taper tantrum. This time, stocks rallied to record highs, as the gradual approach reassured markets that the economy was finally healing.
The lesson: Markets often fear the hint of change more than the change itself.
What it meant for investors
$1,000 in US Treasury bonds at the start of 2015 → $1,083 today, vs $3,301 in the S&P 500.
We start the clock at the start of 2015, the first year in our price data after the event. That is 1.1 times the money, but $2,218 less than a plain index fund made over the same years.
What US Treasury bonds teaches: Bonds bought at very low yields carry real price risk, because the starting yield is the best guide to future bond returns.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2015 | $480 | $1,083 | $3,301 |
| 2018 | $490 | $1,061 | $2,519 |
| 2020 | $560 | $929 | $2,092 |
green = beat the S&P 500 · red = lost money
What if you bought US Treasury bonds? Every starting year and the full story →
More US Treasury bonds history
- 4 February 1994: The Fed starts the great bond massacre
- 18 March 2009: The Fed fires its bazooka
- 15 June 2022: The Fed hikes 75 basis points
- 5 August 2011: S&P strips the US of its AAA rating
- 27 August 2020: The Fed changes how it targets inflation
- 6 October 1979: Volcker's Saturday Night Special
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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