Investment Management Outlook - December 2011

WORLD

Waiting for Godot – or a euro crisis resolution

After experiencing a strong rally in October, equities have subsequently registered a sharp decline. The catalyst behind the reemergence of the 'risk off ' trade once again resides with mounting eurozone concerns. Over the last four weeks the announcement of a potential referendum in Greece, the rise in peripheral bond yields to unsustainable levels, the removal of the administrations of Italy, Greece and Spain and the imposition of technocrat led governments with a remit to impose stringent austerity programmes have raised legitimate questions over the viability of the euro. There is a growing sense that unless Germany sanctions aggressive quantitative easing by the ECB – the end game is fast approaching.