Well, not many people saw that coming! The Fed decided yesterday that the US economy was not strong enough to start the QE taper, so everything (except the dollar) has shot up overnight. The FTSE is up 90 points so far today, but I’ll still be surprised if it breaks out of its 6000-6800 range. I think the euphoria may continue a little while, but once the market has thought about it, we may go back to a mindset where bad news is bad news again. Recently bad economic numbers have been welcomed as making the taper less likely, but, now that Mr. Market has got used to the idea of the taper, I suspect that concern will return to the strength of the recovery.
The Dow hit a new all-time high last night and I think it could reach 16000, but I don’t expect it to stay there very long. I think the FTSE could be back at 6000 within a couple of months, but as it is not correlating well with the Dow at the moment, I wouldn’t like to predict where that would put the US index. The Fed also reduced its forecasts for the economy yesterday and, in time, this may have a negative effect on the stock market.