UniSuper Management Pty lifted its cash holdings in anticipation markets will overreact to any sign the Federal Reserve is readying to start removing emergency monetary policy settings.
Rather than a worrying prospect, moves to reduce monetary easing would be a sign the U.S. economy is healthy, the A$100 billion ($75 billion) pension fund’s Chief Investment Officer John Pearce said. The last time the U.S. central bank tapered in 2013, the only impact was on fund manager performance, not on economic growth, he said in an interview Thursday.
“The market will overreact to some early tightening, and it would be good to have some bullets to fire when indeed the market does overreact to that,” Pearce said. “Nobody in the real economy cared about the taper tantrum.”
Federal Reserve Bank of Dallas President Robert Kaplan indicated Wednesday the central bank will soon begin tapering asset purchases that were brought in to support the U.S. economy in March 2020 as the pandemic disrupted normal activity. In 2013, the last time it tried removing stimulus, markets spasmed as investors sold riskier assets for the safety of bonds. The Dow Jones Industrial Average fell 2% between June and August that year.