The US Federal Reserve has gone down the route of printing a further $600bn. This is not a normal course of action as quantitative easing is usually reserved for when an economy is in turmoil. It is not normally employed for an economy that is growing and has just recovered from the biggest property and credit bubble bursts of recent times.
President Obama suffered huge loses in the mid-terms. It looks like this is the last throw of the dice in a somewhat desperate attempt to bring unemployment down from its longest consistent run above 9.5% since 1948. Unfortunately, by borrowing more to print more the US may feel the effects but will pay for the policy for decades to come.
The reputation of the Federal Reserve Chairman is also being questioned. To many it seems reckless to try to reignite a property market that has just crashed. This is particularly true when the people who buy the properties cannot possibly afford the mortgages that the banks won't give them.
Looking at the affect on the stock market, according to Financial Spreads "As expected the decision to inject $600bn into the economy caused hysteria within the market. The Dow Jones saw a number of volatile 100 point moves before finally settling higher. The volatility was too much for some financial spread betting traders. This is a classic example of the dangers of trading during the release of such a crucial figure."
Those investors who enjoy stock market roller coasters should trade around the release of the US Non-Farm Payrolls'. This US employment data is normally released on the first Friday of the month and often cause big swings in the market.
Having said that, I generally prefer to close my spread betting positions before such releases and then re-open them once the market has settled down. This is a key benefit with spread betting, given that you are opening/closing positions directly with spread betting companies, you are not charged any commissions or brokers' fees.
Of course, if you trade the markets you will expose yourself to some risks. The one thing I try to make sure people understand is that, when trading the markets, you won't win all the time. As with all investments such as trading shares, funds, CFDs etc, you can lose money. With spread betting you can lose more than your initial investment.
You might find it helpful to note a few other points which the following risk notice covers: Spread bets do carry a high level of risk. Before trading, ensure that spread betting matches your investment objectives. Make sure you familiarise yourself with the risks involved. Seek independent advice where necessary'.
Spread bettors do however benefit from a variety of positives. Importantly, because spread betting does not involve the exchange or transfer of assets and is simply a bet, trades are not subject to income tax, capital gains tax or stamp duty*.
Also a wide variety of markets are available. Investors can trade on a significant number of markets from the very popular FTSE and US Dollar/Sterling exchange rate, to the less traded Corn, US Dollar/Polish Zloty and Australian Stock Market.
Finally, in contrast with more traditional share trading, you can take short positions on a market; spread betting lets you trade in both directions. Therefore, should you feel that the FTSE 100 index is going to rise, you can spread bet on it to increase. Conversely, if your research makes you think that the Euro/Dollar rate is going to weaken then you can short the market, ie spread bet on it to fall.
* Based on UK tax law. If you pay tax in a jurisdiction other than the UK then this may be different.
