It seems to me that we are once again reaching a crucial crossroads for world financial markets. Many thought that once we saw the back of an incompetent US administration, a new dawn would break and confidence would return. This does not seem to be happening. Those who had jumped onto the bull bandwagon started jumping off again very quickly overnight.
Commentators have been jumping on indicators such as the Baltic Dry Index (which surely went from last place to first on the “most googled financial terms index” last week) as signs that the markets are starting to improve- another false dawn. Obviously the financial market community will try to talk up the markets but distrust of the financial markets is now understandably widespread from Washington to Downing Street. The markets want the politicians to do more, to bend over backwards, but I’m afraid those days are gone. The greed of the few took care of that!
Strong fundamental reasons for investing in financial markets are also missing and without these, it is very hard to have confidence. Asset markets find fewer buyers despite “value” levels, credit markets begin to shrink again and for FX markets, it becomes impossible to stay long any currency apart from the JPY.
I very much hope I am wrong but after talking to some people this morning, the Christmas cheer has evaporated and it’s doom and gloom all over again.