Global stocks have reached a fresh eight-month high and US equities a new four-year peak. Chalk that up to Ben Bernanke, US Federal Reserve chairman, who signalled that he could launch a third round of money printing, or quantitative easing.
As has been clear for years, “traders will happily dismiss fundamental economic concerns if they come with hopes for more central bank action”, says Jamie Chisholm on FT.com.
One issue investors have been neglecting is the lacklustre earnings outlook in Europe and America. In the US, rising commodity prices, especially oil, are squeezing margins, which are already at record highs. They are due to fall back as they revert to the long-term average.
With petrol prices at $4 a gallon, consumption is likely to suffer and dent company revenues. Analysts now reckon first-quarter profits for the S&P 500 index will be down on last year’s January-March period, marking the first fall since the third quarter of 2009.
In Europe, where the International Energy Agency expects households to spend 11% of their income on heating and personal transport this year, up from 9% last year, earnings have already slipped from last year’s level. Markets intoxicated by easy money could be in for a bumpy first-quarter earnings season.