Mr Market has started 2013 in euphoric mood. The FTSE 100 has soared above 6100 for the first time in almost five years. The Dow Jones Industrial Average is also close to a five-year high at 13,500. And elsewhere across the world stock markets are rising.
So is Mr Market’s optimism justified? Only if you believe that the dollar is a strong and stable currency (it isn’t). That the American fiscal crisis is likely to be resolved in the near future (it is difficult to see how). And that tensions within the euro have been resolved by Mr Draghi’s commitment to “do whatever it takes” to save the single currency (which they haven’t).
With the strongest Eurozone nation, Germany, apparently about to enter recession, one of the few glimmers of light on the horizon is the fact that the Bank of England, at least for the time being, appears to have abandoned its counter-productive Quantitative Easing programme, which has had such a destructive effect on Britain’s savings, pensions and investments. Provided there is no recommencement of QE, there is a chance that the UK will experience a fragile recovery in 2013.
But generally, there seems very little reason for Mr Market’s current euphoria.