And yet, while markets in China fell like a dragon that lost its wings in mid-flight, markets in the US hit new highs yesterday.

Okay, for the Dow that’s not new. It was the 29th time this year the index has finished the day with an all time high. It’s now 1170 points up on the start of year position, and 1911 points up on the record set on January 14 2000, before stocks crashed.


But, perhaps more to the point, the SP 500 closed at 1530, a new record. The previous high of 1527 was set on March 24 2000. The Russell 2000, which tracks smaller stocks, also set a new all time high, while the NASDAQ hit a six year high. Mind you, the NASDAQ record stands at 5132 set on March 10 2000, so yesterday’s closing price of 2592.6, might have been the best score since 2001, but it still means investors who have tracked this index since the beginning of this decade have lost half their money.

But why did the US do so well? It was the Fed that did it. But actually the Fed didn’t really say anything to justify such a good response.

The Minutes of the last meeting were released. The Fed feels that the housing market decline is worse than it expected. It is still worried about inflation, meaning hoped-for falls in the rate of interest might be further off than previously hoped, but it did say it thought economic growth would pick up in the quarters ahead. It was that piece of optimism amongst the down beat comments that had markets reaching for the buy button.

One analyst said it was if the markets were interpreting both good and bad news as if were good.

© Investment & Business News 2013