Signals from the Monetary Policy Committee that it is likely to recommence quantitative easing in the very near future have provided only a muted boost to UK asset prices. While gilt yields have continued to fall, equity prices have remained very soft while corporate bond spreads have shot up. Instead, it seems that markets have come to the conclusion that additional monetary stimulus will provide only a modest boost to the economic recovery. Indeed, UK markets appear to have rightly focussed on the implications of very weak domestic and global economic growth for asset returns.
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