Steady as she goes wins day for investors

LaSt week’s Budget, despite being fairly light on policy compared to previous years, still had a clear impact on markets with the ftSe all-Share having its second- best day so far in 2015, rising 1.54pc.

the Pound fell earlier in the day as wage growth disappointed and the markets pushed back expectations of interest rate increases.

together these two events and the subsequent market reaction frame the UK’s current economic situation: healthy growth and uncertainty of when, or even if, the Bank of england will find reasons enough to raise interest rates.

Complicating the already murky outlook is the most uncertain election in living memory.

the country remains in the cross hairs of global market events but let’s focus on what we know: economic performance at home is good, which is positive for stocks; and any interest rate increases that do come will be gradual.

Given the forces buffeting the economy, and the upcoming election, the Chancellor chose to make relatively minor changes from a macroeconomic perspective. Clearly the message is for now: steady as she goes.

on the same day as the Budget, tidal waves were being made by the US federal Reserve.

Investors are keen for clues over when the world’s largest economy plans to end the era of zero interest rates. no quite yet, it seems.

the fed’s forecasts of weaker inflation and lower future interest rates sent the dollar down and bond and equity prices up.

the strength of the currency, the stubborn refusal of american employers to raise wages sufficiently and uncertainty over how much of the savings from lower energy prices will be saved rather than spent will keep the central bank on hold for a while yet.

the first rate increase is still expected to come this year, but the central bank is determined to support the economy as long as it takes. for now: steady as she goes. Meanwhile, it is all systems go on policy support in the eurozone, as the european Central Bank throws all it can at its economy.

Whether it was the policy response or not, the outlook is brightening: growth is positive, unemployment is falling and investors are piling into european bonds and equities.

In Japan too, an aggressive central bank is expanding its balance sheet in an attempt to spark growth and inflation.

While falls in the Yen have been the primarily driver of higher equity prices in the land of the Rising Sun, recent developments give hope of renewed confidence in Japanese corporations that could unlock their potential to generate higher earnings for investors.

the prospect is tantalizing, but we have seen false dawns before.

Why does all of this matter? there are reasons to be a buyer of shares across the developed world: economic strength in some places, aggressive policy actions in others ( which will keep interest rates low and bonds well supported).

Instead of choosing what area to emphasize, investors should stay diversified and instead focus on currencies.

lower exchanges remain a key part of the story for europe and Japan, whereas the US cannot stop the Dollar from rising even if it wants to.

EVeRYone hopes the US and UK can lead the world out of the era of extraordinary monetary policy.

Call me an optimist but I think a more normal era is on the horizon.

But for now, the world remains a familiar one: halting, patchy progress and enormous policy support.

asset markets have reason to rise further. Stay invested. for now, steady as she goes.