On Wednesday, January 29th, Ben Bernanke disclosed his final act as the Fed Chairman as he announced a taper of liquidity from $85B to $75B, with an additional reduction of $10B beginning in early February. On February 1st, 2014 - Janet Yellen will take the seat as the first female Fed Chair. Yellen will attempt to wind down the Fed's unprecedented bond-buying program while trying to strike a delicate balance between reviving a still sluggish economy with high unemployment, and managing the risks of inflation or recession down the road. Overall, it appears her primary focus will be on reducing the unemployment number within the US economy and boosting job participants for 2014. For investors, this means the Fed will likely continue to be accommodative, holding short rates at zero and continuing its massive bond buying, albeit at a slower pace as the economy strengthens. "Being supportive of continued risk-taking among investors and entrepreneurs has been one of the Fed's primary goals," according to Richard Carter, vice president of fixed income products at Fidelity. "The last thing it would want to do is upset the apple cart by removing the stimulus too quickly or unexpectedly, slow the recovery, and cause investors to retreat to cash. If they were to reduce bond buying by $10 billion each month, the QE program would run until the fall. During that time, they can see what happens to inflation and the economy and adjust as needed. If the economy accelerates faster than expected, then they would have the grounds to wind down QE sooner-and I believe markets would view it as a positive." For a full script on Fidelity's ViewPoints see https://www.fidelity.com/viewpoints/investing-ideas/the-yellen-fed What to do? 2014 will see more volatility in the markets as investors and corporations become used to less 'liquidity' through QE. This may cause some short-term pains, but investments should be based on the fundamental strength of each company and their potential growth prospects, not a stimulus or lack-there-of, from the Fed. We remain optimistic and overweight in U.S. equities, while also diversifying positions in low-correlated fixed income assets such as High Yield, Convertibles or Floating Rate Debt.