Game Changer

After last Thursdays announcement from the US Federal Reserve of  'unlimited' QE (or QE infinity, as some people are calling it), the game has truly changed. Some commentators and optimistic fund managers are hoping this will provide a permanent floor under the markets and the index will grow to the sky !! Unfortunately, things do not work quite this way. While it is perfectly feasible that earnings multiples may expand and valuations increase, it is also true that the market will anticipate this and also begin to factor in that the central bankers have indeed used their last silver bullet, re-modelling on that very basis. Unfortunately, the shock news on Thursday did cause the market to 'pop' once more and trigger our stop, frustrating to say the least, but acceptable in the context of QE becoming a known 'known'. Our model obviously still shows the market as severely overbought, but with the month and quarter end just around the corner we will let discretion trump valour while the market digests this truly shocking news.