Economy

The optimism shown on global sharemarkets over the first 3 months of this year has certainly shifted back to one of pessimism on fears that an imploding Europe will trigger another Global Financial Crisis.

The turnaround isn’t a shock. It was a sucker’s rally which was unlikely to last.

On March 12, we wrote right here;

“While the summer weather may have been dodgy in parts of Australia, the sun was certainly shining on investment markets. Global sharemarkets in January and February turned in their best performance for years.

But we can’t help but wonder whether equity markets have raced ahead of reality and there could be stormy times ahead. The ugly stick could be about to drop.”

It is an amazing lesson in investment cycles and market psychology. The big danger is when we focus on daily market movements rather than step back and look at the big picture.

So lets set the scene first.