Kessler Applauds Fed, Urges Very Selective Value Investing

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NEW YORK ( TheStreet) -- Marian Kessler, co-portfolio manager of the Becker Value Equity Fund, explains why the Federal Reserve's timeline to curb its stimulus measure is right and sensible even as she remains concerned about China and whether the recent volatility in the bond and stock markets has been due in part to questions about the financial underpinnings of the world's second-largest economy.

The Portland, Oregon-based Kessler expects a pullback in equities in the coming months though the value investor did reveal stocks she added to her portfolio during the past five months. The Becker Value Equity Fund manager typically invests in companies with market capitalizations greater than $10 billion.

Andrea Tse: Fed Chairman Ben Bernanke said the Fed will likely wind-down its bond buying program later this year and conclude it by the middle of 2014. Is that timeline too aggressive given that U.S. data is still pointing to modest to moderate growth? What do you think is the real motive behind this aggressive timeline announcement, and do you think the Fed will actually stick to it?

Marian Kessler: This Fed leadership is much more transparent and open than the leadership under Greenspan. So it's been very straightforward in terms of executing what they say they're going to do. I personally don't think that the tapering or waning should come as a surprise to the market or is particularly aggressive. I think it's very reasonable, particularly with asset prices. The QEs, all of them, QE1, 2, Twist, and now 3 have all really supported asset prices, specifically stock prices. And we've seen an extraordinary move off of the 2009 lows that has really been driven by Fed policy. And with the equity market up nearly 20% through May and being in positive territory the past four years, I think it's time to take a bit of wind out of the sails of the market.

The Fed is not there to determine the direction of stock prices. But obviously the creation of bubbles is a concern. I think it's a reasonable timeline. The market is getting used to the idea pretty rapidly. We've also seen really good news in housing. Although there's still a lot more to go in the employment picture, there's been some improvement there. So, what I think they're doing now is appropriate.

Tse: Ever since the FOMC announcement last Wednesday, we've seen a lot of volatility in the stock and bond markets. How much longer do you think this volatility will continue?

Kessler: I would expect volatility to continue. And the volatility is not just being driven by speculation about changes in Fed policy. It's being driven by a number of other factors, I think most notably China, economic news out of China, as well as liquidity issues globally in fixed income markets, in emerging markets.