So much for the cruelest month. Stronger-than-expected economic data gave stocks a pop yesterday, and investors also rediscovered their appetite for risk across currency and commodity markets, shunning the bond havens of the past few weeks.

It may be hard to remember now, but August started the same way. The Dow Jones Industrial Average jumped 208 points on the first day of the month, as the strong earnings season went to investors’ heads. That party ended badly when investors concluded that the US Federal Reserve was ready to turn off the music – or at least to intervene in the market once again.

However, it appears markets may have misinterpreted the Fed’s decision to reinvest the proceeds of maturing mortgage bonds in Treasuries. The minutes of the crucial Fed open market committee meeting show a few members worried that its action would send an “inappropriate signal” that it was ready for large-scale intervention. That signal was certainly sent: speculation of another round of quantitative easing, dubbed “QE2”, has been rife ever since, bolstering bond prices and encouraging a gloomy view of the economy.