The market will be consumed by the Fed and what policy makers will have to say for themselves next week. Investors collectively have already done some significant pre-meeting asset price damage this week. The bleeding only happened to stop after investors took some comfort in a WSJ Fed watch report suggesting that any bond tapering would be gradual in nature and that rates would remain "low" for a considerable period of time.
A communication challenge remains for Ben and his policy-making cohorts. By now everyone should be aware that future Fed policy should undertake three distinct phases: tapering, pausing, and tightening. For many individuals the unknown variable is the length of time between each of the above phases. The market is expecting "helicopter Ben" to press home the point next week that there will be a considerable amount of time between ending (note: not tapering) QE and raising rates.
The Fed needs to be very transparent when highlighting the point between "taking the foot off the gas and applying the brakes." Getting its message across in a clear and precise manner, with the least amount of market destruction, is not an easy task for central bankers. Separating the three phases, especially as unemployment eases is a trick not yet learned. It's the Fed's job to make the transition from each phase as smooth as possible. Let's hope its communication skills are sharp next week -- not too many can handle back-to-back weeks of such price destruction.