Market Viewpoints
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"Coming together is a beginning; keeping together is progress; working together is success."
With every passing day, the Eurozone resembles the legendary Potemkin village – a fake construct that hides behind its facade a potentially damaging situation. Every time there is a crisis, the Eurocrats in Brussels have a new “construct” to calm the markets, but the picture behind the scenes is getting worse. If the original Potemkin village was a small settlement, the Eurozone is a Potemkin village on a Jurassic scale. Nothing will ever change the reality in the Eurozone – the individual countries have very different underlying productivity rates, as well as social and political systems and therefore a fixed exchange rate (the Euro) cannot bind them together without straitjacketing and destroying some of them (as is becoming evident now). Amid the Eurozone gloom, hope springs eternal for the US economy. February personal spending numbers, released last Friday, suggest the US economy grew at a clip over +3.5%. No doubt the “wealth effect” of increasing house prices is fuelling this rise in personal spending of US consumers. Despite my bullish views on the US economy, I expect things to slow down in Q2 as the impact of Sequestration grows and the debt ceiling debate is back in focus. The seasonal trend of a strong Q4 and Q1 followed by a weak Q2 could materialize yet again.