Don't chase market stampedes as risks run amok
By Mike Dolan
LONDON (Reuters) - If both the perma-bears and perma-bulls are wrong in their immovable convictions about the long-term global investment outlook, then 2012 may require a more agile beast and possibly one with both claws and hooves.
For all the outsize macroeconomic risks and the depressive effects of unwinding debts, markets have made an eye-catching rebound this year on the back of unprecedented monetary pumping by central banks and a still-powerful private business cycle.
But the likely persistence of these opposing forces mean it's just as hard to retain faith in this rally as it was believing last autumn's funk would be endless. To return to the market beast analogy, the sheep at least should be careful.
"Perma-bulls can just sit back and relax - at least until it all changes," ING's Chief International Economist Rob Carnell reckons, urging caution in assuming this year's rally in risk assets from equity to emerging markets will persist.
The skepticism is widespread.
In a paper entitled "Deja Vu," HSBC global economist Karen Ward says there will be no sustained recovery in western economies until real household incomes - stagnant for five years and making it harder to pay off debt - start to pick up.
And, as with 2011, political and policy deadlock on both sides of the Atlantic remains largely unresolved, she added.
"There are undoubtedly some green shoots evident in the global economy. But we are acutely aware that we have been here before, with such rampant enthusiasm early last year." Continued...