Who tapers — Ben or Yellen?

Analysts are still debating when the Fed will start tapering, and they’re split into two camps.

One believes Ben Bernanke will begin the process before he steps down as the Chairman of the Fed on January 31, while others think incoming Chairman Janet Yellen will be the one who starts to rein in quantitative easing further along in 2014.

Read: Fed may taper in December

There’s only one meeting left in 2013, on December 17-18, and another January 28-29 before Bernanke steps aside. The following three meetings will be held March 18-19, April 29-30 and June 17-18. Those who think tapering will begin with Bernanke don’t believe the upcoming budgetary and debt ceiling debates will be a distraction for the Federal Reserve.

I’m inclined to disagree: Bernanke may have expected the October showdown in Washington, resulting in the Fed’s tapering delay in September. Congress has agreed to fund the government until January 15 and will raise the debt ceiling through February 7. It’s certainly possible we could go through another round of paralyzed negotiations, as some members of the Tea Party have little to lose by making a statement and holding Congress hostage. Hopefully calmer heads prevail and Washington will get out of the way so the U.S. economy can recover without undue interference.

Read: Equities to keep climbing in 2014, says Russell

If the new year brings cheers instead of jeers on Capitol Hill then tapering in January is not out of the question. However, I suspect the Fed may wait until the March meeting before making its first move, as Congress will hopefully negotiate a deal that’ll remove the debt ceiling from discussion until after the next mid-term election in November 2014.

The key point is that tapering is coming and portfolios need to be positioned accordingly.

TRADING WEEK AHEAD

On the earnings front, U.S. results will start taking a back seat to reports out of Canada from S&P/TSX listed companies. Almost all of the Dow Industrial companies have reported Q3 earnings, but we have yet to hear from Walt Disney Co., which reports on Thursday.

In Canada, we’ll see a mix of results across many sectors from Agrium and IAMGOLD in the materials space to Manulife and Great-West Lifeco in financials, to BCE and TELUS in telecommunications. So far, earnings season has been respectable in the United States, but the verdict is still out in Canada with so many companies yet to report.

While the U.S. may fall out of the spotlight on earnings, it will dominate the headlines when it comes to economic data, namely the employment report for October, which is due out on Friday. Economists are expecting 125,000 jobs were created last month, which would be a decline from September’s 148,000.

In Canada, economists believe 12,000 jobs were created, but the unemployment rate is expected to rise slightly from 6.9% to 7.0% as more people enter the workforce. Not to be outdone, Europe will be in focus as both the European Central Bank (ECB) and Bank of England will make interest rate announcements on Thursday. While the status quo is expected for the U.K., there are some rumblings that the ECB could actually cut rates or hint that a rate cut is forthcoming.

Read: Apple’s earnings plunge; holiday sales may shrink

Gareth Watson is the Vice President, Investment Management & Research at Richardson GMP in Toronto. This team of research experts is responsible for monitoring and interpreting economic, geo-political situations, current market environments and trends. @Gareth_RGMP