Analysis

Developed economies are generally holding up despite a European recession caused by efforts to reduce government deficits. In the US, the property market purge is close to ending and US growth in 2010 should be more robust.

Confidence seems to have returned to markets since the beginning of 2012. Risky assets have generally benefited from this recovery, none more so than emerging country bonds. Even so, their appeal is not only due to a revival in risk appetites: for both fundamental and technical reasons, emerging debt is increasingly considered as a core portfolio holding even if it is still essential to remain selective.

After a bleak 2011, markets have been enjoying an energetic rally over the last 3 months. Markets are closing higher, Italian and Spanish yields are back to bearable levels and the Dow Jones has now moved above the symbolic 13,000 level for the first time since May 20 2008. But does this mean that the crisis is over?

Despite an improvement in the financial environment, the reduced likelihood that the eurozone will break up and more stable economic indicators, 2012 could well be another difficult year. However, the eurozone could offer some genuine upside: European companies can boast excellent fundamentals and certain countries and sectors have managed to buck the trend.

Capitalism stands accused of all kinds of social and environmental transgressions and of milking society rather than nourishing it. Capitalism is in crisis and has to reinvent itself.