This weekend, with the Greek Parliament staging a dramatic “make-or-break” vote on monetary union, it would be easy to lose sight of what’s happening in the UK. Events in the eurozone are dramatic, to say the least. Those who talked breathlessly of “a resolution” are being forced to think again. During the first five weeks of 2012, granted, global equities posted their best opening to any year since 1987. Was this the start of a genuine recovery, though, or just a Suckers’ rally?
The answer could hinge on what’s now taking place in Athens. Or, at least, if the deal finally forged between private sector Greek creditors, eurozone governments and the European Central Bank isn’t absolutely credible, the recent rally could quickly go into reverse.
Global investor sentiment is now not only split down the middle, but the split is getting deeper and wider. The optimists and pessimists are further apart than ever. Those who insist “the worst is behind us” are clashing with those who fear we could face another big lurch. I’ve noticed lately that such forecast polarization is often apparent even within individuals. Seasoned financial professionals flit from bullish to bearish, from “risk on” to “risk off”, sometimes within the same conversation. There is profound uncertainty, with recent share price rises seeming to compound the sense of confusion, rather than providing “relief”.
The outlook for the world economy – at least the Western world – seems grim. The International Monetary Fund’s newly updated World Economic Outlook says global growth will be significantly weaker than previously thought, with the eurozone as a whole likely to go into recession, even if another “Lehman moment” is avoided.