Market Viewpoints
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"The future is already here – it’s just not evenly distributed."
If Mr. Market were anxious about withdrawal symptoms after the end of the US Federal Reserve’s Quantitative Easing (QE) program, it needn’t have worried. The Bank of Japan (BoJ), in an almost perfectly synchronized move, followed with a JPY10 trillion increase (or about 2% of Japan’s GDP) of its annual target for expansion of the money supply. In Europe last week, Mario Draghi, President of the European Central Bank (ECB), did a good job dissipating the confusion around the ECB’s willingness to do more for the economy. He reiterated that the ECB was in a high state of preparedness to provide further stimulus, if required to do so. He also added that, contrary to speculation, the Governing Council was “unanimously” (he used the word “unanimous” five times during the press conference) behind the goal of expanding the balance sheet. The US mid-term elections saw Republicans seize control of the Senate from the Democrats. This result has arguably reduced President Barrack Obama to a “lame duck.” His policies have been repudiated, and it’s now up to him if he also gets “plucked.” Should Obama choose to negotiate and broker a deal with the Republicans (rather than use executive orders to govern), many things could be achieved and this will be positive for the US economy as well as the US equity market. All is not lost with Republicans controlling both Houses of Congress in the US. The last time this happened was in 1994 under President Bill Clinton, when the S&P 500 Index gained +25% during the ensuing 12 months.