Market Review

Global equity markets resumed their rally in September that helped the FTSE gain an impressive 6.27%. The main cause of this upward movement was better than expected economic news from the Eurozone, US and the UK, which eased many investors’ fears of a double dip recession.

Ever since the global economy dragged itself out of recession late last year, there has always been a niggling feeling in the back of many economists’ minds that the economic recovery was not sustainable. Nevertheless, confidence remained high during the first half of this year; the global economic picture was far brighter than economists had forecasted during the darkest days of the recession. However, during the summer the niggling sensation started to return as US and Eurozone economies showed signs of weakening. During September better than expected economic news indicated to many investors that the rate of growth but would still remain in positive territory, which abated fears of a double dip recession.

With the slowing pace of the Japanese, US, Euro and the UK economies it was only a matter of time until central banks started to speculate whether or not to print more money and buy government debt with it (Quantitative Easing). During September these central banks have all made statements highlighting the difficulties facing the global economy and their willingness to resume QE. The good news is that the central banks have identified that the banking system is still limping along and it will be another couple of years until it reaches suitable strength to fully support a recovery. However, the impact of the next round of QE will be limited as government bond yields are already at a historical low; therefore, it will be difficult to imagine that this additional money will have much affect on the system. Nevertheless, the news of possible QE helped equities rally during September.