Luke Stellini, European/Global product director at Invesco Perpetual, provides his latest outlook for European markets
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Current marketrally similar to early 2009 - a look at the lessons for 2012
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Healthy, dividend paying stocks expected to hold in a challenging market backdrop
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Oil price is at an all time high, with negative implications for economic activity
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Possible wage inflation in Germany could boost consumption in the future
Swearing in print is rightly frowned upon, however this week marks the three year anniversary of a market move that may still elicit a chorus of expletives in the fund management industry. In early 2009, the pendulum swing from a mindset of systemic collapse to one of cyclical recovery drove a violent rally in markets. The rally, which quickly became known as the ‘dash to trash', was led by the architects of the crisis, highly levered businesses, with banks at the forefront. Fast forwarding three years, a three years of almost constant systemic crisis, sees markets in a not too dissimilar mood to 2009, with a risk on mentality driving the shape of market leadership. In this piece we will look at the way market performance evolved post the initial euphoria of Q2 2009 to see if we can draw out any lessons for 2012. In addition we will look to some of the current issues, like the oil price, as possible drivers of market direction.
The emergency provision of huge amounts of central bank liquidity over the lifetime of this crisis has been the main trigger of market rallies. Markets have forced the hand of policymakers as bank funding has been withdrawn, threatening the ultimate survival of the financial system. When faced with this choice, policy makers have stepped up. By the time this intervention has occurred however, markets have moved to discount a bearish outcome. The removal, albeit on a temporary basis (jury still out on 2012), of this systemic risk through central bank intervention, has led to the sorts of rallies we have seen in 2009 and 2011/2012. In 2009, it was the rhetoric and actions of the US Federal Reserve that contributed significantly to the change in sentiment. In 2011 it was the ECBs intervention via the LTRO that saw markets violently reverse their bearish course.
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