St. James's Place News

18 Sep 2012

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Wall Street hits five-year high as investors welcome QE3

Wall Street hits five-year high as investors welcome QE3Following on from the European Central Bank's commitment to make unlimited purchases of government bonds in secondary markets, last week's decision by the US Federal Reserve to launch an open-ended effort to spark a recovery in the US significantly reinforced the positive mood.

Investors now seem convinced that the decisive action taken by both central banks will buttress the world's two largest economic regions and buy time for the eurozone politicians to resolve the euro's shortcomings.

European shares hit highs not seen for more than a year; and on Wall Street the S&P 500 extended a rally that has pushed the leading index to its highest level since late 2007 when it reached a new, all-time high. Commodities also fared well as gold, silver and oil prices gained more than 2% over the week.

Also in this week's bulletin...

  • The Chairman of the US Federal Reserve, Ben Bernanke, announced the central bank's long-awaited decision to give the US economy another financial shot in the arm to boost growth. But, as ever, Mr Bernanke's plan had a twist to surprise the markets.
  • The ECB's decision to buy unlimited quantities of government debt has led to lower borrowing costs for the likes of Spain and Italy as they struggle with austerity and recession. However, the purpose of the move was as much about easing short-term outcomes as it was to eliminate the risk of a complete eurozone break-up.
  • As the world's second-largest economy prepares to undergo a once-in-a-decade leadership change next month, China continues to dominate emerging market growth.

View this week's Market Bulletin (PDF), which contains thoughts and opinions of St. James’s Place and our range of investment managers on the key issues affecting investors.

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