“We suspect that the situation is not as dire as the markets seem to think. Irrational fears may be taking over, but should eventually calm once the hard evidence comes as a relief,” Chaar added.
Others are a little more concerned, while being far from pressing the panic button.
“We are at an interesting juncture,” said Richard Champion, deputy chief investment officer at Canaccord Genuity Wealth Management. “Economic news is generally similar in vein to what we saw for most of 2015: a deceleration in emerging markets, but a relatively solid performance from the US, the UK and even the Eurozone. Leading indicators, unemployment and average hourly earnings data do not suggest a recession. Nonetheless, signs of market stress are proliferating.”
“Many European bank share prices are below even the lows they reached in 2009, including major names such as Deutsche Bank and Credit Suisse; corporate bond markets are also demonstrating classic symptoms of duress; in energy, commodities and financials the cost of insuring against default is soaring; emerging markets are looking wobbly; more generally company profits have clearly rolled over at least in the short term; and investors are now spooked even by central bank moves to keep the show on the road,” Champion continued.
The European banking show remains on the road, and hopefully with the right decisions from banks’ managements, host governments and central banks it will remain so.
