Markets in recovery mode but is the worst over?
Worldwide stock markets staged a marked recovery yesterday amid hopes that the financial crisis gripping Europe may be coming to an end. However, is this really the end of the concern and confusion amongst investors or are we seeing a short-term recovery?
There is no doubt that stock markets bounced yesterday but whether the worst is over within Europe and the worldwide economy remains to be seen. It is easy to forget that the cost of finance is creeping ever higher in the international money markets which is a major concern going forward. The higher the cost of finance for financial companies the higher the cost of finance for consumers and businesses which could seriously derail the ongoing economic recovery not only in Europe but worldwide.
It is very dangerous to take one days movement on the worldwide stock market in isolation and automatically assume that the trend has been broken. There is a saying in the investment world that "the trend is your friend" and while trends do often turn sharply, it is the long-term direction of stock markets which you should monitor. Whatever happens over the next few days and weeks we are certain to be in for periods of relative volatility.
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