Greece will have to exit the eurozone before equities find a floor to rally from, amid the biggest period of deleveraging in history, according to predictions from UK-based investment house Iveagh's chief investment officer Chris Wyllie.
Greece will have to exit the eurozone before equities find a floor to rally from, amid the biggest period of deleveraging in history, according to predictions from UK-based investment house Iveagh’s chief investment officer Chris Wyllie.
– The biggest issue will remain deleveraging, in both banks and governments. Global investors will wake up to the fact that the biggest deleveraging story of all – the US government – is only just beginning. This will test their faith in US equities as a safe haven.
– The three year trend of US equity outperformance versus Europe will start to reverse. The biggest policy mistake of 2011 was to squeeze European bank balance sheets whilst squeezing public spending and the growth consequences of this will reverberate around the world.
– The biggest disappointments will come not from Europe, nor the US, but from Asia, with China taking centre stage when it comes to worries about global growth.
– By late spring, investors will be confronting the threat of a global recession.
– With the Presidential election close at hand, there will be (misplaced) concerns that Fed action may be inhibited. The dollar will soar.
– Casualties will include sterling and commodity-related currencies such as the Australian dollar. Gold will also suffer, with fears that the ten year bull run may be over.
– Greece will leave the Euro, which prompts a selling climax before equities finally find a floor and start to rally.
Chris Wyllie is chief investment officer at Iveagh