The Eurozone, Austerity Measures and Economic Growth

23 Mar
OK, so the question now has to be asked – Was the Eurozone Austerity Measures in the face of the Debt Crisis the right move? I don’t believe we can answer this question yet. Yes, I am concerned as we haven’t solved the problem but rather just pushed it on a little while into the future. Could these measures deepen the recession in southern Europe? There are signs that following the initial euphoria the effect is more detrimental than beneficial – my question is still – did we have a choice?
The actions taken have had the effect of putting a safety net around the European financial system and hopefully by deferring the need to deal with the actual problems, may be they will sort themselves – or will they? So what for the economic outlook?
Europe Excluding UK (IMA Sector Profile)          

Source: Trustnet
So what for the European Markets? Investing is different to economic forecasting, the markets typically see a wide divide from the economic data. I believe this is due to the markets, their values and their future values are barometers of investor’s sentiment, future corporate profitability and perspective. This is not in actual terms but rather relative to current opinion.
So if the markets are optimistic and become less optimistic, we could see a fall in value – if markets are pessimistic and become less pessemistic, we could see a growth in value. The market has become significantly optimistic in recent times – so where will the market lead – more optimistic or more pessimistic?
Personally, looking at the indicators, the market is overstretched and indicators point to a correction of at least 5% but will it be a blip or a more serious move, only time will tell. I have taken a more defensive position and this has warded off the recent negative volatility and we are prime to reposition with a higher equity position following this mini-cycle.
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