This stock rebound is just a sugar rush
Feb 06, 2012
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The bulls are back. The FTSE All-World Index gained more than 6% in January. The latest surge was down to Federal Reserve chairman Ben Bernanke. He said interest rates would stay low until 2014 and hinted at yet more quantitative easing (or money printing). This continues the pattern seen over the last few years. “Like junkies needing a further hit, investors are desperate” for more monetary easing, says Buttonwood on Economist.com.
But when will they twig that money printing seems to have had little impact on growth? The US is only “muddling through”, says Steven Ricchiuto of Mizuho Securities. There’s little sign of growth taking off.
Meanwhile, Wall Street fourth-quarter earnings were “weak, once you take out Apple”, says Barry Knapp of Barclays Capital. Then there’s Europe.
Sentiment has improved as a result of the European Central Bank lending banks money for three years. That has made a banking collapse far less likely. But the surge in liquidity can only alleviate, not solve, the debt crisis. So don’t count on a lasting market rebound. Investors, says Buttonwood, are “enjoying a sugar rush”.
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