Investment Newsletter - September 2012

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Investment Newsletter September 2012

Risk On? The phrase that has most summed up investment markets over the past couple of years has been “risk on/risk off”, now being shortened by some to “roro”! Essentially, this means that risky assets (such as equities, commodities or the riskier parts of fixed interest) are either all moving up or all moving down together, depending on sentiment. We have been in a “risk on” phase over the past couple of months as markets recover, but how long could this continue?

Quantitative easing The Federal Reserve’s Ben Bernanke recently announced a further bout of quantitative easing in the USA. This could have a major impact on markets. Whilst we are now onto our fourth round of quantitative easing in the UK, QE in the US has a much bigger impact on the global economy and Bernanke has just announced a third tranche. QE effectively involves a central bank electronically “printing” money in order to buy bonds from institutions. The idea is to get more money into the financial system to stimulate the economy.

The most recent announcement has some differences to the first two periods of QE. Previous QE has been announced with a specified value of assets to be purchased. QE1 in the US was initially for $600 billion, later increased to $1.25 trillion. QE2 was for a further $600 billion and ran from November 2010 through to June 2011. The latest round of easing, QE3, is open ended, leading some to dub it “QE Infinity”! The Fed have Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Services Authority. Equilibrium Asset Management is entered on the FSA register under reference 452261. The FSA regulates advice which we provide on investment and insurance business; however it does not regulate advice which we provide purely in respect of taxation matters. Copyright Equilibrium Asset Management LLP. Not to be reproduced without permission


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