Nevermind the November 2 gubernatorial races. This week, all eyes have turned to a public official who packs far greater clout than any state governor.

I’m referring to Jerome Powell.

After rhetorically preparing Wall Street for months, Federal Reserve Chair Jerome Powell on Wednesday finally made it official: the “tapering” of the central bank’s asset purchases is about to commence. See this November 3 tweet:

At the conclusion of its two-day meeting Wednesday, the Federal Reserve’s Federal Open Market Committee (FOMC) didn’t reveal anything earth shattering. The FOMC’s news was a non-event, which was just fine with investors.

The FOMC announced:

“In light of the substantial further progress the economy has made toward the committee’s goals since last December, the committee decided to begin reducing the monthly pace of its net asset purchases.”

The Federal Reserve has been purchasing $120 billion in mortgage-backed securities and Treasury bonds every month to pump liquidity into the financial system but stated Wednesday that starting this month it will reduce that amount by $15 billion per month.

The Fed’s main policy interest rate, which affects borrowing costs for individuals and businesses throughout the economy, remains set at near-zero.

Unlike in 2013, the news of tapering really wasn’t a surprise. Wednesday’s announcement underscored the Fed’s cautious go-slow approach in pulling back stimulus. This time around, Wall Street liked what it heard. Instead of a tantrum, investors gave a collective cheer.

On Wednesday, the major U.S. stock market indices rose as follows: the Dow Jones Industrial Average +104.95 (+0.29%); the S&P 500 +29.92 (+0.65%); the NASDAQ +161.98 (+1.04%); and the Russell 2000 +42.43 (+1.80%).

Wednesday marked the fourth session in a row that the Dow, S&P 500, and NASDAQ all closed at new highs. Wall Street equates the taper with economic strength.

The jobs market further improves…

The Labor Department reported Thursday that initial unemployment claims, for the week ended October 30, came in at 269,000 versus 275,000 expected. Continuing claims for the week ended October 23 came in at 2.105 million vs. 2.147 million expected. Both readings represent pandemic-era lows. In pre-market futures trading Thursday, the U.S. stock market indices were mixed but holding firm.

The biggest worry on Wall Street right now is inflation. The personal consumption expenditures (PCE) index picked up by 4.4% in the year through September, significantly above the Fed’s 2% goal. However, the Fed insisted Wednesday that inflation levels are elevated on transitory factors, such as supply chain disruptions that should eventually ease.

Read This Story: The FOMC Tightrope

The first so-called taper tantrum occurred in mid-2013, when the Fed announced it was considering how to wind down its extraordinary stimulus. That mere chatter prompted a correction among stocks.

But the taper already is priced into stock prices. It would have been shocking if the Fed hadn’t announced it. Also keep in mind, rate hikes are still about two years away.

The only hawkish tilt to Powell’s remarks Wednesday was his assertion that the Fed may change the pace of the taper if warranted by economic conditions, but such adjustments cut both ways.

Further, the Fed’s pullback may also have been an acknowledgement that the stimulus is exerting a corrosive effect on markets by creating asset bubbles.

The current investment climate is tricky to analyze. Some forecasters say the U.S. economy is on the upswing and will support rising market valuations even as Fed stimulus recedes. Other market gurus worry that the Fed is acting too quickly, because the pandemic-battered economy may not be ready to support itself without the continuing largesse of our central bank.

One factor keeping this bull market alive is FOMO (Fear Of Missing Out), which prompts investors to indiscriminately rush into stocks. You need to stay selective. And that’s where our Investing Daily analysts can help.

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John Persinos is the editorial director of Investing Daily. Subscribe to his video channel.