Market Bulletin

The Market Bulletin looks to discuss some of the key financial and economic issues influencing financial markets and how these may impact on our clients.

30 January 2012

Markets remained buoyant last week with the US market (as measured by the S&P 500) pushing into bull market territory with a rise of 20% since October. Sentiment was helped by the Chairman of the Federal Reserve, Ben Bernanke, promising not to raise US interest rates for the next three years. This promise of cheap money together with the potential for more money printing implicitly persuades investors to take on more risk as it makes holding cash much less attractive. This creates an environment which is very supportive for equities both in the US and globally, explaining why equity markets continue to shrug off the Eurozone crisis.

Last week also saw the publication of the latest economic growth numbers. The UK fared slightly worse than expected with economic activity shrinking in the forth quarter although one off factors such as severe weather and public sector strikes were probably to blame. It is likely that the numbers will be revised upwards in the months ahead as more data becomes available. In the US however, growth was much stronger and there is clear evidence that the US economy is ahead of the curve in its recovery cycle compared to other developed economies. Consumer confidence has returned, corporate balance sheets are in very good shape and even the moribund housing market is showing evidence of a recovery. Many fund managers have therefore been increasing their US exposures as returns are likely to be supported by a strengthening US$ in the year ahead which will provide a positive tail wind for UK investors.

To discuss any of these points, please contact us in the usual way.

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