US equities rally to an all-time high.

12th July 2013

Ian Copelin, Investment Director, my wealth comments “US equities have now erased all the losses resulting from Ben Bernanke’s (the US Federal Reserve Chairman) comments that the FOMC (the US central bank) may start reducing the pace of bond buying this year and end the purchases around the middle of next year (please see my market update dated 20 June 2013).

US equities have been helped by Ben Bernanke’s subsequent (and contradictory) comments that a “highly accommodative monetary policy for the foreseeable future is what’s needed in the US economy”.

The S&P 500 yesterday closed up 9.58 points (1.29%) at a record high of 1,675.02 – topping the previous high of 1,669.16 on 21 May 2013 before Federal Reserve tapering fears sparked the recent sell-off and up from the resulting low of 1,573.09 on 24 June 2013.

Markets have also been helped by the publication of minutes from the FOMC’s meeting held on 18-19 June meeting, which showed that while several members judged that a reduction in asset purchases “would likely soon be warranted”, many officials wanted to see more signs that employment is picking up before they’ll begin slowing the pace of the $85 billion monthly bond purchases.  Interestingly, it was announced yesterday that the number of Americans filing for unemployment benefits unexpectedly increased to a two-month high last week – highlighting that weak economic data can be taken positively by markets (please see my market update dated 26 June 2013)!

In the UK, the FTSE-100 has recovered nearly 9% from its low on 24 June 2013 – albeit still 4% off its 2013 high.  Mark Carney signalled that the Bank of England will keep interest rates at a record low for longer than most investors were expecting as he used his first meeting as the new Governor to give more insight into future policy, stating that the ‘implied rise in the expected future path of bank rate was not warranted by the recent developments in the domestic economy’.”