Thursday, 1 October 2015

Markets suffer steep falls, Fed to rescue?

Markets have not performed well in 2015, according to a Bloomberg report.

Rounding out its steepest quarterly descent in four years, the MSCI All Country World Index of shares is down 6.6 percent in 2015 including dividends. The Bloomberg Commodity Index has slumped 16 percent, while a Parker Global Strategies LLC index of currency funds dropped 1.8 percent. Fixed income has failed to offer much of a haven: Bank of America Corp.’s global debt index gained just 1 percent, less than the 2.5 percent increase in world consumer prices shown in an International Monetary Fund index.

US stocks have not been spared from losses. The S&P 500 finished the quarter with a 6.9 percent decline despite jumping 1.9 percent on Wednesday.

However, the Federal Reserve "put" may help mitigate further losses. From another Bloomberg report:

Federal Reserve officials often behave as if they have a mandate to take financial stability into account when they make interest-rate decisions, according to a research paper co-authored by Boston Fed President Eric Rosengren.

“Frequent mentions of financial instability terms at the FOMC, particularly during bust periods, result in a statistically significant reduction in the funds rate,” the paper said.

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