When I posted yesterday early, markets had ticked up after assorted helpful noises from the World Bank, IMF and others.
This morning, after the US Federal Reserve cut rates by 0.5%, markets are heading down again.
As the cut was at the top end of what might have been expected, this is not in the least surprising. It gives a signal to markets that things are ‘really bad’.
There are other predictable effects: the US dollar will weaken which may be good for the US economy and bond prices will rise as yields fall further in the expectation of even lower rates later. That latter impact is good for investors whose main insurance is having a fixed income element set against the equities in the their portfolio – for now at least.
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