Will 2013 be the beginning of the end of aftermath of the GFC?

2012 was meant to be the year the UK finally escaped from the “re-pression” (a hybrid a of a depression and recession) that was caused by the Financial Collapse of 2008-09. However, it was not to be. Despite the Jubilee and the Olympics, the damage wrought by both a long in the tooth Labour Government and the profligacy of the major banks has proved to be too deep to remedy in the space of just 4 years. How Ed Milliband and Ed Balls dare to show their face in the Commons just goes to show what a despicable class of people politicans really are…

Several studies have shown in fact that it takes on average seven years to recover from a financial crisis as opposed to the four that is generally the case for more normal recessions.  With the additional issue of constrained fiscal policy through the heavy Government debt burdens, you can see why many commentators have predicted that it will likely be 2018 before the economies of the UK and the West start to recover properly and show real self sustaining traction. And yet, there have been some positive developments during 2012 which give some hope of a slow change in the tide. The main one being the seeming “set in stone” desire to keep the Eurozone together, to allow a managed debt default for Greece and still remain within the Euro and also attempts put Spain on a similar path suggest that the “can” that is the Euro crisis has been kicked a little more firmly down the road.

An end game to the crisis there certainly will be, but it maybe more of a democratic one based on the voting on a new treaty than a market induced variety. Additionally positive is the fact that China has rebounded from a soft mid-year and is pulling most of the Asian and commodities markets along with it. This means that there is likely to be a positive external stimulus to the UK economy in the coming months and a continuing steady supply of cheap imports while the pound remains relatively firm and which are important for keeping inflation low.

Yet, despite this better outlook, the US Fiscal Cliff threat still remains, although the chances are this will be resolved at one minute to midnight as per usual for the USA.  If it is, then it is quite a rosy picture as we enter 2013. With bonds at all time highs, Gold seemingly past the peak of its bull market and commodities priced fairly rather than extravagantly, there is some hope that Equities will finally come back into fashion after 10 poor years. Volumes should pick up as institutions start to rotate out of bonds and real volumes should help to put an end to the challenging trading environment of very spiky prices driven by momentum “bots”. 2013 should be a better year than 2012 and a year in which selected equity markets are in the vanguard of returns tables in 12 months time