Equity markets are off their highs on worries that the Federal Reserve will soon start tapering its quantitative easing, but three well-known fund managers say the Fed’s not going to shift gears anytime soon.

The Fed has given guidance on what it will take to end the stimulus, says James Montier, a member of Jeremy Grantham’s asset allocation team at GMO LLC. Those guideposts are 6 percent unemployment and 2.5 percent inflation.

“Unemployment is at 7.5 percent and inflation is at one. We are miles away,” Montier says.

Richard Bernstein, chief executive officer of Richard Bernstein Advisors, a subadvisor of Eaton Vance Management, says investors need to put the Fed’s action in a longer-term context.

“There have always been times when there [have] been some concerns about changes in Fed policy and whether the fundamentals are strong enough to handle the changes in policy. It’s a normal occurrence. It’s a bit of a bigger issue because the Fed has been more involved,” Bernstein says.

Montier and Bernstein spoke today on a panel at the Morningstar Investment Conference in Chicago.

Montier marveled at just how fast the market changed its perception toward the Fed’s quantitative easing program.

“We’ve seen a huge shift in the market since last year. [It has gone] from pricing in a period of financial repression lasting 25 years … to not only tapering [stimulus] but thinking they’re going on a tightening cycle,” Montier says.

The Fed could always change its mind, Montier notes, but he doesn’t expect any tapering soon.

Bernstein says the Fed is not a leader, but actually lags behind economic conditions when finally making the decision to change monetary policy. In its research, Bernstein Advisors has had a “hard time” finding many examples of the Fed reacting early to economic conditions.

This time, the Fed may wait even longer before changing policy, he predicts.

“Our estimation is that they will be more lagging than normal. We think by the time they start to reverse course people will think, ‘What took them so long?’ We don’t think we’re in that environment right now,” Bernstein says.

Bernstein gave another reason for his belief that the Fed will not taper anytime soon: They don’t want to see all the work they did to prop up the economy fall apart in a matter of weeks.

“They spent the past three or four years trying to support the economy,” he says. “I don’t think they’re the smartest guys in the world, but I don’t think they’re that stupid.”

The stimulus by the Fed and other Western nations’ central banks has made it difficult for investors to find decent values amid the low interest rate environment.

Michael Mendelson, portfolio manager of risk parity strategies at AQR Funds, who also spoke on the panel, agrees it’s a tough time to invest. But he says investors need to focus on what they can do since they can’t control government policy or interest rates.

He says investors should create a portfolio with exposure to as many different types of returns as possible, including alternative investments such as liquidity premiums, reinsurance and real estate. “Go wherever you can find assets that are not as correlated,” he says.

The key, Mendelson says, is to build a better risk-adjusted return portfolio.

Diversification remains important, but there is some misunderstanding on this topic, Bernstein says.

“Diversification is a risk-reduction tool. If you get a higher return, that’s the icing on the cake, but that’s not the purpose,” he says.

Interest rates will eventually go up, so long-term investors need to be patient, Montier says.

“The pendulum will swing … and you want to take advantage of that,” he says. “You don’t want to be fully invested. You want some cash to be able to take advantage of opportunities. To quote Winnie the Pooh, ‘Never underestimate the value of doing nothing.’”