The US Federal Reserve, meeting next week, may take a decision that could rein in some of the strong gains made by stockmarkets this year, according to Chief Investment Officer Haig Bathgate.
Investors have worried for some time that the so-called tapering of the Fed's quantitative-easing programme could dampen prospects for companies, as the monthly injection of $85 billion into the economy has helped sustain the recovery. Recent positive data announcements – the US jobless rate fell to a five-year low last month– have reinforced speculation the Fed might say on December 18 it intends to withdraw some of its stimulus. While many analysts say markets tend to rise in December, the Fed's announcement may help prove them wrong this year.
The end of year also sees a shakeup in the membership of indices such as the FTSE 100, with those companies whose market value has shrunk making way for businesses whose value has climbed. One of the most likely contenders to join the UK's benchmark is the Royal Mail, whose shares have surged about 70% since it was sold by the government earlier this year. Although mostly symbolic for the companies involved, the changeover is a burden on those index funds that have to buy shares in companies that are joining the index and sell out of those firms who find they're now too small to make it into the top tier.
Haig also commented on the difficulties for Domino's Pizza in in attracting workers in the UK, and the departure of Nathan Bostock from Royal Bank of Scotland after just 10 weeks in his job.
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