OREANDA-NEWS. In the first half of September, the attention of investors in the global financial markets was focused on the upcoming meeting of the US Federal Reserve (hereinafter referred to as Fed).

During the FED meeting should have declared the first real steps to close up the QE program. The vast majority were convinced that such an announcement would be made, the only question was about the size and timing. In anticipation of this important event, market players continued to implement their strategic investment ideas - to sell bonds and to buy stocks. That was done aggressively enough, considering the correction in August, as result the global stock index rised by nearly 5% and the yield on 10-year US bonds increased up to 3% (maximum in the last 2 years). However, the results of the Fed meeting were surprising, to say the least. That was quite a rare occasion when the US Federal Reserve did not meet the market expectations and, rather than close up the QE program, decided to continue it indefinitely “awaiting more evidence that progress will be sustained” in the US economy. This decision caused a positive surge on all markets, but in practice it was gone on the following day. The main reason for this is that, if prior to the meeting all seemed clear and understandable, a question about what next arose after it. What will the Fed’s policy be effectively, and what will influence its subsequent decisions? In the face of such uncertainty, many players preferred to lock in profits, which led by the end of the month to the global stock index losing most of its growth of the first half of the month.

The bond market followed a similar trend - a positive surge after the Fed decision followed by cooling. So far, continuation of the QE program has not been able to change the mood dramatically or to cause the flow of money into the market. Much will depend on the macroeconomic data in the US, based on which one can try to make new forecasts about future steps of the US monetary authorities.

The fund managers adhered to the previously developed strategy. We would like to remind that using the stock index growth, in the middle of the month the fund manager decided to lock in part of the profit on some positions in order to restore them at a more attractive level, which was done in early September. Also, due to the issue of positive economic data in Europe and China, which have given the hope that the global economy finally was emerging from the crisis following the United States, as well as to reduction of geopolitical tensions in connection with the events in Syria, it was decided to invest some of the funds’ assets in emerging markets. In our opinion, that the stock index of emerging countries lags behind the global stock index by more than 20% since the beginning of the year does not reflect the real underlying situation and suggests possible return of investors’ interest in these markets in the medium term.

In bond funds, as in the first half of September the yield on US debt securities has almost reached the levels predicted earlier, it was decided to reduce the cash component. Subsequent events showed that the decision was correct, but the new uncertainty and the absence of any signs of change in the current trends caused the decision on locking in profits at the end of the month. As a result of these actions, the cash component was increased again in the structure of the funds.