Bernanke now the key as America's printing largesse sends returns soaring above FTSE

Will he or won't he? I am referring to the man who has had the biggest single effect on stock and bond markets - and the Investment Club's unit price - since the credit crunch erupted: Ben Bernanke, chairman of the US Federal Reserve.

This month his quantitative easing (part two) money printing extravaganza draws to a conclusion and, in anticipation, US and UK bond prices have been creeping up. The consequence of this is that the club's unit price came to within a whisker of reaching an all-time high. But in the final analysis it only equalled it at 2.77.

Sticking with the club's paper and pencil (pap) analysis through its darkest hours at the beginning of this year has produced an 11 per cent increase in the unit price, against a 1.5 per cent increase in the FTSE over the same period.

How does the pap analysis see the markets panning out by year end? If we assume that Bernanke has his hands tied because of the tug of taxes verses spending cuts war up on Capital Hill in Washington and does not pump prime the US economy again this year, then equities are down and bonds are up. But by how much?

Initially, our analysis sees the FTSE falling through its 200-day average around the 5,800 mark but finding a near-term bottom around 5,500. In the same time frame - say the period to the beginning of August - the Dow will probably sink to its 200-day average, around 11,600.

Now, bear in mind that this will be about the time the US will go bankrupt if Democrats and Republicans cannot cobble together a sensible deficit reduction programme. If they do not come up with a solution then stocks and bonds are worth less than a wet tissue. In this scenario, the club would sell all and buy gold.

A further assumption is that this outcome will be avoided. In which case, any sort of agreement on how to reduce the mushrooming US debt will be greeted with some relief and financial markets will rise. But only momentarily, because the very agreement will mean that money is sucked out of the economy.

In this case, pap analysis sees the Dow falling to about 10,500 before 2011 is out, before perking up a bit as the year reaches its conclusion. The FTSE, on the other hand, looks a trifle more vulnerable and will have to go as low as 5,100 before it too comes good at the end of the year.

But what should the Investment Club be doing to maintain the upwards march in its asset value?

Hopefully we can collect a dividend from Scottish & Southern Energy (SSE) before we sell out of it. But even if we sell out pre-dividend, and the Dow and FTSE are falling as anticipated, we would squirrel away the SSE sale proceeds into government bonds.

However, for this to be a winning strategy, War Stock will have to continue rising and break through 85.50.If this happened then substantial profits would accrue to Investment Club members and the fifth and final chapter in the bull market in government bonds, which has been in place since 1981, will have begun.

The game plan for this month is to make sure we share in the final bull-run by coming out of SSE at our 14 sell limit and reinvesting in War Stock on any dip in prices, then sit back and enjoy being a bubbling bond bull.