IVOL - Fed Tapering Outlook: Focus On Labor Recovery

• The Fed continues to be patient in communicating - or even discussing - its plans for tapering, with the rationale that such conversations could lead investors to aggressively reprice monetary policy expectations.
• Though highly uncertain, we define the FOMC's "maximum employment" target as equivalent to an unemployment rate between 3.5% and 4.0% and a pre-pandemic level of labor force participation of 63.3%.
• We believe that a potential start of the tapering conversation could result in greater market volatility in the second half of the year, as investors grabble with this transition.

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