Major News This Week : September 23, 2013

Last week, the U.S. Federal Reserve surprised financial market pundits all around the world. While a median result of analysts expected Ben Bernanke to announce that the Fed would reduce bond purchases by $10 billion per month, instead he announced that it would continue the program at its current pace of $85 billion. The Fed has also reduced its growth forecast for the U.S. economy over the next three years. The statement that the quantitative easing program would continue unchanged allowed the S&P 500, the benchmark index in the U.S., to climb to a record high. This had a very strong effect on the U.S. dollar, which fell close to 1% against most international currencies. The news had less of an impact on Canadian markets, but on Friday we learned that inflation was growing 1.1% on an annual basis, or well below the Bank of Canada’s target rate of 2%. Have a good week!

The Loonie
“I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.” - Albert Einstein

With conflict in Syria continuing to capture the headlines across the world, it is worth noting the affects previous geopolitical instability has had on the performance of the Canadian dollar.

Over the past month, the tug war between what action(s) should be taken in light of escalating civil unrest in Syria sent jitters amongst investors and caused significant volatility in asset prices across the globe. However uncertain markets may seem at the moment, if history is any indication, appreciation of equities may be in the cards in the not so distant future. Originally issued by Deutsche Bank and reprinted by The Telegraph, the diagram below (left) illustrates the impact historical conflicts have had on the S&P 500’s performance through out the 30 year time period.

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