US stock markets hit a record high and global markets rallied on Wednesday after the Federal Reserve unexpectedly said it would maintain its economic stimulus program.
Most investors were expecting the central bank to begin withdrawing the bond-buying program. Despite positive economic indicators, the committee is taking a cautious approach. The organisation said, “The committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”
Stocks traded slightly lower throughout the morning, but took off following the Fed’s announcement. Standard & Poor’s 500 Index was up 20.67 points, or 1.21%, to 1,725.52. This beats the previous record set on August 2, when it reached 1,709.67.
The Dow Jones industrial average reached 15,676.94, after a jump of 147.21 points, or 1%. The Nasdaq Composite also increased by 1%, following a rise of 37.94 points to 3,783.64.
The Fed’s decision has given the stock market a boost in the short-term but investors are advised to remain cautious. Speaking to the Guardian, Marc Doss, regional chief investment officer for Wells Fargo Private Bank, said, “Investors need to take a step back and consider the idea that maybe the US economy is on weaker footing than we originally thought.”
The Federal Reserve has also cut its 2013 GDP growth forecasts. Growth between 2% and 2.3% is now expected. This compares to the June projection, which estimated growth between 2.3% and 2.6%. The forecast for 2014 has also been downgraded to 2.9%-3.1%.
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