This is a good day, markets like what they have heard from Europe and the solutions proposed covered all the main bases:

  1. Greek haircut of 50% ( about right)
  2. EFSF at about 1 trillion euros ( about right)
  3. Banks to raise 100 billion of new capital (hope this is about right, no way of knowing)
  4. New rules to prevent this stuff happening again (definitely right but listen for the sounds of squealing National Parliaments being asked to give up sovereignty, it will be noisy)

So there we have it, disaster averted, history made and back to normal, well kinda but not exactly:

  1. Europe has huge and unfunded social commitment, public sector pensions, healthcare and unemployment benefits. These will have to be reduced, so social unhappiness likely
  2. It has an ageing population
  3. It still has a one size fits all currency and interest rate
  4. It is slowing economically with high levels of unemployment in many countries
  5. Italy is too big to fail and hugely indebted
  6. It has a convoluted bureaucratic political system which will make meaningful change tortuous to achieve

That being said:

  1. The banking system of the world was not imperilled by a disorderly sovereign default
  2. The markets saw Europe produce a creditable plan
  3. US and Chinese economic data has been much stronger than was feared by markets
  4. The double dip fears have receded in the US
  5. Markets have posted the best October returns in decades
  6. There is a ton of money on the side-lines waiting to get back into equities and with interest rates at zero it can’t wait forever, confidence will beget rises which will beget confidence which ….etc etc

The outlook for stocks until year end is more likely to be positive than not, it’s a good day!

NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.