Are The Markets From 2011 Repeating In 2012?

4 Apr

Recently, there has been much publicised about the buoyancy of the markets, with more appetite for risk assets – all true but I believe it will be a rocky road with corrections along the way. I am also concerned that there may be a market ceiling, which markets won’t break though in the near-term.

It is uncanny when we review the markets from the start of 2011 and much of the same was reported. The profile looks scarily similar for many similar reasons – this led on to two periods of major correction and rally in the year.

I think it is fair to say, that this isn’t a normal market recovery. I have heard it described almost like an abusive relationship where the abnormal becomes the normal, and we accept as normal what is clearly abnormal behaviour.

The situation so far :-

  • In the short-term we are hopeful that the improved economic data from the States will lead on to more and better than expected news. The problem being, this is not the whole story.
  • So far, we have had at best, a weak recovery globally with loose monetary and fiscal policy.
  • De-leveraging has and is being used to stabilise fiscal markets but by its’ nature is a growth constraint (the money and interest has to be repaid) and is dis-inflationary.
  • The Eurozone Debt Crisis dominates European Agenda for most of the latter half of 2011 and the issues are still to be solved.
  • There are signs that concerns over the Eurozone Debt Crisis is returning but the focus being Spain and Italy, rather than Greece – seems to be building momentum in a similar way to last year.
  • Spain is the fourth largest economy in the Eurozone so is significantly larger than Greece economically – so the measures needed will be expected to be proportionately larger.
  • The European Central Bank helped boost the European banking system through two mass liquidity injections to restore confidence in the European markets and banking system.

I personally believe that we will have periods of exuberance and periods of panic in 2012. The recovery is likely to be positive but anemic and so growth will not be excessive but the fundamentals show that we are slowly resolving the situation. This doesn’t mean there won’t be casualties, collapses and failures but rather we will continue and grow but not as well as we may hope.

In these situations there will also be the growth of new markets, sectors, trades and industries; where we will see successes and failures. The art is picking well, being careful but not too careful and always take advantage of opportunities both good and bad – by avoiding a loss places you in a strong position to buy in at cheaper prices to benefit from an expected price bounce and associated profits.

Good luck investing and if you need a professional approach, contact me on the details above or email me at

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