(AP Photo/Mark Lennihan)
(AP Photo/Mark Lennihan)

OPINION: Investors buoyed by extra US stimulus to support recovery

By Nigel Green Time of article published Jun 17, 2020

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Investors who have been “paying attention” have been topping–up their investment portfolios and will continue to do so.

This come as stock markets around the world further rallied on Tuesday after the U.S. Federal Reserve announced an expansion to its historic stimulus programme.

Global stocks have been buoyed by the news from the Fed - the world’s de facto central bank – to buy individual corporate bonds in addition to the exchange-traded funds it is already purchasing, to support the world’s largest economy.

“This extra stimulus acts as a ‘backstop’ or ‘floor’ for equities. 

The additional Fed support was widely expected by the markets and therefore, investors who have been paying attention have been topping-up their investment portfolios recently as entry points will inevitably continue to go higher as we move forward.”

It is likely that savvy investors will continue to enhance portfolios as the backing is likely to be maintained for years, not quarters.

Also, it has been reported that President Donald Trump’s administration is preparing to unveil a $1 trillion infrastructure package. This will further boost asset prices.

Further stimulus can be expected from the Fed - and also perhaps from Congress too - in the near future… This will support and likely boost asset prices moving forward. Investors will now be eyeing the opportunities before any fresh or enhanced stimulus packages are announced.

London’s FTSE 100 and Frankfurt’s Dax both jumped 2.2% in morning trading on Tuesday, the pan-European Euro Stoxx 600 gained 2%. U.S. futures markets suggested that U.S. stocks would rise further when trading begins on Wall Street, with S&P 500 futures up 1%.

In Asia-Pacific, Tokyo’s Topix shot up 4% and Australia’s S&P/ASX 200 gained 3.9%. Meanwhile, Hong Kong’s Hang Seng rose 2.4% while China’s CSI 300 index was 1.5% higher.

Few things can fuel markets like another stimulus injection.

The message investors are taking away is that the U.S. central bank and government are prepared to do whatever it takes to support the recovery.

Nigel Green is the the chief executive and founder of deVere Group

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