Thomas Becket, chief investment officer at PSigma says in his latest monthly outlook that Europe's politicians continue to make the ongoing crisis worse.
Thomas Becket, chief investment officer at PSigma says in his latest monthly outlook that Europe’s politicians continue to make the ongoing crisis worse.
The current market conditions are amongst the most challenging we have experienced in the last few years. Panic and pain is forcing some investors into buying practically worthless ‘safe haven’ assets and there is fear and loathing directed towards any investment that is perceived as being risky. Selling of equities and buying of ‘quality’ government bonds has become almost indiscriminate at times, as yet another bright start to the year for financial markets has given way to a miserable summer (and that’s before the football has even started).
The markets have certainly offered the politicians a resounding ‘nul points’ for their warbled and off-key efforts, as European equity markets have collapsed and dragged other global markets with them. It would still appear that many investors are willing to give them the benefit of the doubt, believing they will be able to re-mount their square-wheeled bikes and get them moving forward again. This hope for resolution, much like the riding of such clumsy contraptions, is a dangerous game. Despite the much hyped sticking-plasters that were applied to Europe around the start of the year, Europe’s woes have barely started to be addressed and political uncertainty in Greece and the urgency for help in Spain illustrate quite how serious the situation has once again become. As Europe burns, its leaders fiddle and argue. For some time, many commentators have argued that the European creditor countries will allow the debtor countries to go to the brink, in order to ensure that lessons are learned. In recent weeks, it seems the brink has been reached. The time for action in Europe is now.
The path to stability for Europe remains obvious to us, but unpalatable to the Europeans for a number of reasons. The Germans do not want to be force fed an hors d’oeuvre of commonly-issued Eurobonds and the chastened Club Med countries don’t fancy an entrée of swingeing austerity. Nobody wants to touch the dinnertime subject of loss of independence. The political stand-off continues even now and there seem few signs of light from the European politicians, who remain incapable of reaching an agreement, even as their economies become dragged down further into a pernicious recession. Our prediction in the political stalemate is the same as for the European Championships, as we expect the Germans to win on (financial) penalties, showing all that they are uber alles in Europe.