Monday, 20 February 2012
Markets fully loaded in 6 weeks of 2012
I find myself thinking all the time that this year is going to be a repeat of last year.
After all, 2010 had been good, economies in the West and East had bounced back after the huge fiscal stimulus for 2009. Markets had come back and although everyone knew there were deep underlying problems, the sentiment was that there was time to sort everything out - yes growth rates would be slow, but there was growth.
So at the beginning of 2011 there was a big 'risk-on' phase continuing where 2010 left off. However, events undermined it all. Oil spiked as the Arab Spring began. Then slowly the realisation hit that the Euro area was really in trouble and another catastrophe could hit. Some of the fiscal stimulus started to wear off too.
In the end 2011, ended a terrible year with Western Countries slipping into recession, much discussion of Euro break-up and the US recovery in doubt.
Just 6 weeks into 2012 and we are back to Jan 2011 in terms of markets and sentiment. Greece and the Euro area are being stabilised, number suggest growth is returning and the East has not missed a heart beat.
Yet, Iran threatens the oil supply and just like last year the price has spiked. Oil at $120 is probably not compatible with any real economic growth, so central is it to the world economy. Greece too is still likely to collapse at some point this year as successive bailouts fail to fix the underlying problems.
The markets seem to be discounting this with the FTSE100 bubbling up to near 6000 today, is this a case of deja vu all over again though?