Markets: handbrake turns for 2012?
The head of the European Central Bank (ECB) is the Italian Mario Draghi. The Pope is the German Benedict XVI. You know we live in extraordinary times when we have an Italian central banker and a German Pope! (not vice versa)
The eurozone crisis continues to dictate market moves around the globe. Politicians (elected and unelected) are at the centre of the unfolding drama. This makes sensible analysis extraordinarily difficult - though common sense remains a decent guide.
High profile casualties are already commonplace. Bumbling Berlusconi, tricky Trichet, and “zipper” Strauss-Kahn have had their last curtain calls in 2011. (The last two were former heads of the ECB and IMF respectively).
Democracy is also a casualty. Democratic government has effectively been suspended in Italy and Greece (which is dangerous).
The star of the show is undoubtedly Angela Merkel, even if reluctantly so. She has already outlived peers in Greece, Italy, Spain and Ireland. In 2012 she may also say “adieu” to French President Nicolas Sarkozy - there are very real risks around the latter’s forthcoming election, see page 6 and 7.
Apologies for having a focus on politics here. But for now, any investor or adviser who chooses to ignore the political angle in their investment planning is being negligent.
So the eurozone remains centre stage, as we anticipated, and we consider this on pages 6 and 7. By contrast, the US and China, the other two pillars of the world economy, appear to have manageable problems. They are much less at the mercy of political events, and there is even room for (relative) optimism.
There are clear opportunities around the globe once the eurozone fog clears, which we consider elsewhere. Remember early 2009? After sharp falls in prices across a range of assets and funds there were historic opportunities. We believe there will be more fantastic opportunities for the patient.
The key investor skill to be tested in 2012? The ability to change course under conditions of great uncertainty.