Well, it finally happened. The Fed announced today that it will start reducing its Quantitative Easing (QE3) program by tapering the bond purchases from $85 to $75 billion a month, starting in January 2014. The Fed also reassured investors that it will keep interest rates low for the foreseeable future.
The stock market reacted positively: the Fidelity Spartan 500 Index Fund made a new all-time high today and almost all equity funds closed up. The notable exception is the gold mining sector that continues its bear market.
The announcement pushed the yield on the 10–year treasuries higher, which in turn caused the Fidelity Spartan Long-Term Treasury Bond Fund (FLBIX) to go lower. We would continue to avoid investing in FLBIX until this long-term trend reverses.
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