SUMMARY. As with the same time last year, stock markets have risen in tandem with enthusiastic headlines proclaiming economic recovery, only for reality to rudely interrupt.  Markets are now beginning to roll over and down, which should create superb opportunities. There are elections just ahead in both France and Greece, and political risk remains high, whether derived from inadequate politicians or disgruntled voters. Keep an eye on the headlines.

Apologies for the delay in this months commentary, Easter has been a distraction, along with markets themselves, on which point…

…as with the same time last year, stock markets have risen in tandem with enthusiastic headlines proclaiming economic recovery, only for reality to rudely interrupt. Markets are now beginning to roll over and down, and it would not be a shock to us if the FTSE 100 index moved into the 4000’s – creating superb opportunities.

It’s not our job to be cheerleaders, like so many who would have you believe everything in the garden is rosey. It isn’t. Let’s be clear, there are emerging opportunities, but these need to be exploited with a bit more subtlety than was the norm for much of the last 30 years.

Starting with the heralded economic recovery, the UK, at best, has stabilized at a low level. Similarly in the US. Europe is in recession, and even Germany is showing signs of pain in manufacturing. There is a slowdown in China, but the scale remains unclear.

The troubled eurozone continues to be the main concern, as a new banking crisis will infect the world, as we explained in the last TopFunds Guide. The impact of the European Central Bank (ECB) action before Christmas is beginning to wear off. You might have spotted that Spain is back in the headlines, and we identified 2 years ago in the TopFunds Guide that troubles in Spain should be monitored carefully. Keep an eye on the headlines.

Other than Spain there are elections just ahead in both France and Greece, and political risk remains high, whether derived from inadequate politicians or disgruntled voters. The first round of the French Presidential election is just ahead (22nd April) and the final round is the same day as the Greek general election, Sunday 6th May. The likely winner in France, François Hollande, wants to re-negotiate with Germany the fiscal pact agreed last November – you might recall that this was to be the long term savior of the eurozone, and it is already being widely ignored.

As for Greece a number of anti-eurozone and fringe parties appear quite prominently in the polls – from neo-Nazi’s to Soviet-style communists. There is still a strong possibility of a default and eurozone exit in the months just ahead, which will shake global markets even though it is “just” Greece.

The next note will be in the week following the 6th May elections, when we hope for a bit more clarity and growing investment opportunities.