NEW YORK ( TheStreet) --
Enough with the tapering talk already. Considering the state of the economy, it's going to be a long time before it happens.
"Despite all the reports to the contrary the economy is still weak," says Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds. "We still have disinflationary, perhaps deflationary, pressure. The Fed is still very concerned about mortgage rates going up to 4% and they don't want to snuff out this housing recovery."
If anything, says Jacobsen, the Fed may shift the composition of its purchases out of Treasuries and more into mortgage-backed securities in order to prop up the housing market. He also says Fed-Chairman Ben Bernanke needs to be more careful with his words considering his current level of scrutiny. For instance, an ill-worded, off-the-cuff statement at his last Congressional appearance in May sent stocks tumbling.The Fed's trend towards transparency is fine, says Jacobsen, but "they just need to communicate a little better." And as for President Obama's recent remark to Charlie Rose that the Fed chief has "already stayed a lot longer than he wanted or he was supposed to", Jacobsen says he expects no policy change as a result of any such move. Most importantly to investors, says Jacobsen, the Fed may seem like it's the entire story; however, it is only moving the market on the margins. In his opinion, improving fundamentals are the real engine that will drive stocks upward. "Earnings will stay positive. We don't expect to see a robust growth in earnings, but you won't see it roll over like a lot of people are fearing." He advises buying stocks on 1-2% pullbacks, because we "probably won't get that 5-10% selloff people are waiting for." Unless, of course, the tapering chorus incomprehensibly reaches a crescendo again. Written by Gregg Greenberg in New York