Stim-u-late mar-kets! Come on! It’s monetary easing.*
The European Central Bank (ECB) was singing a tune that invigorated financial markets last week. The Wall Street Journal explained:
“The fresh measures included cuts to all three of the ECB’s main interest rates, €20 billion a month of additional bond purchases atop the ECB’s current €60 billion ($67 billion) program, and an expansion of its quantitative easing program to highly rated corporate bonds – all more aggressive steps than analysts had anticipated. The central bank also announced a series of ultracheap four-year loans to banks, some of which could be paid to borrow from the ECB.”
Most national indices in Europe gained ground last week. The Financial Times Stock Exchange Milano Italia Borsa (FTSE MIB), which measures the performance of the 40 most-traded stocks on the Italian national stock exchange, was up almost 4 percent. Spain’s Indice Bursatil Español Index (IBEX 35), which is comprised of the most liquid stocks trading on the Spanish continuous market, gained more than 3 percent. Major markets in the United States moved higher, as well.
Of course, the harmony provided by global oil markets proved pleasing to investors, too. An International Energy Agency (IEA) report suggested more equitable supply and demand balances could mean oil prices have bottomed out.
Barron’s offered a word of caution, “Investors shouldn’t get too comfortable when it seems that oil moves and central-bank maneuvers are the main reason stocks go up or down, not earnings and economic growth.”
*Set to the tune of Kool and the Gang’s ‘Celebration.’ You know, “Cel-e-brate good times! Come on! It’s a celebration.”
| Data as of 3/11/16 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 (Domestic Stocks) | 1.1% | -1.1% | -0.9% | 9.1% | 9.2% | 4.7% |
| Dow Jones Global ex-U.S. | 1.1 | -2.5 | -9.6 | -2.3 | -1.6 | 1.3 |
| 10-year Treasury Note (Yield Only) | 2.0 | NA | 2.1 | 2.1 | 3.4 | 4.8 |
| Gold (per ounce) | -1.0 | 19.1 | 10.0 | -7.1 | -2.2 | 8.8 |
| Bloomberg Commodity Index | 2.0 | 1.8 | -19.6 | -16.5 | -13.3 | -6.8 |
| DJ Equity All REIT Total Return Index | 1.7 | 1.7 | 4.7 | 9.0 | 11.0 | 6.4 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
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