Newspaper article The Journal (Newcastle, England)

Season of Change throughout the World's Markets; World Markets Are Undergoing Huge Changes Which Impact on Us All. GARY FAWCETT Takes a Look

Newspaper article The Journal (Newcastle, England)

Season of Change throughout the World's Markets; World Markets Are Undergoing Huge Changes Which Impact on Us All. GARY FAWCETT Takes a Look

Article excerpt

Byline: GARY FAWCETT

THERE have been some significant changes in world markets over the past six months, with the biggest change being the comment from Ben Bernanke, chairman of the Federal Reserve in the US, that it would start to taper its bond purchasing programme with the market originally expecting this to begin in September.

The news initially pushed many markets around the world lower by 10% or more but we have since seen developed markets such as the UK, US and Europe recover.

The Federal Reserve surprised investors last month when it announced that it would not yet start reducing its bond purchasing programme but would continue to wait for the economic recovery to gain further traction.

Whilst the Federal Reserve will no doubt start reducing its bond purchasing programme sooner rather than later it has said that interest rates are unlikely to change for the foreseeable future.

Indeed, it is unlikely to start raising rates until unemployment falls to 6.5%, compared with the current level of around 7.3%.

This forward guidance by the most influential central bank in the world has provided confidence to investors both here and overseas.

Mark Carney, the new Governor of the Bank of England, has also stated that interest rates will remain at the historic low levels for some time and has noted that the Monetary Policy Committee will only consider increasing interest rates once the UK's unemployment rate falls below 7%. He does not expect this to happen until 2016 at the earliest.

Whilst the low interest rate environment is not good for savers, it is an encouraging environment for consumers and equity markets and we would therefore expect the recent recovery in share prices to continue.

One theme driving equity markets has been the "hunt for yield" whereby investors have been looking for better income returns. The UK market has, and continues to be, a higher yielding equity market with many companies listed paying attractive dividends to shareholders. …

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