Looking back, 2011 was a very unpredictable year. Even though we knew there were a number of concerns out there, political upheavals and natural disasters raised the levels of uncertainty.
We started the year with the knowledge that risk, post the global financial crisis, had increased and that the global recovery was going to be patchy at best. What we may have underestimated was investor nervousness at the lack of clarity and resolution of the many issues facing the global economy. As such, looking forward to 2012 requires one to take a step back, reflect, and move back to basics.
One of the most daunting problems looking forward to 2012, remains the discrepancy between reality and perception in the financial markets. Investors are very much focused on the news flow which has been rather negative and worrying, but at the same time when we look at corporate earnings results and economic data, the outlook is stable. This disconnect is reflected in the global growth outlook, which according to the IMF, remains positive for 2011/12, however the valuations in financial markets are reflecting a global recession.