Why the FTSE's rally is doomed

To view the FTSE's recent rally as the start of a new bull market makes no sense. It is almost certainly doomed to fail. Here's why.

On Wednesday 13th May, the Bank of England warned that the "green shoots" now visible in the economy could wither as private sector banks might not have sufficient lending capacity to fuel the recovery. Disregarding most of the optimism in financial markets and business surveys, Mervyn King judged that both the short term and longer term outlook for growth had deteriorated since February - the future, he said, was highly uncertain. His comments, as Ben Broadbent of Goldman Sachs said, were more pessimistic about lending than three months ago Mr Broadbent thinks that's quite perverse. We think Mervyn King knows, from his position, a few things that even Goldman's don't know.

The minutes of the Fed meeting held on 28th29th April saw "significant downside risks" to the outlook for the US economy, saying that the global financial system was still "vulnerable" to further shocks. The Fed also surprised the market by scaling down their outlook for the US economy and scaling up their outlook for unemployment.

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