Experts at City firm Investec believe stocks will soon be lifted, in the short term at least, as the current Eurozone crisis reach some form of resolution.
Analyst Ewen Stewart says the broker’s bullish view, held since 2009, has been ‘severely challenged’.
And he explains his bullish view is based not on economics, but on political choice.
“While there may not be formal Eurobonds, the European moment of truth is upon us. Either Germany accepts some major form of monetary creation and much tighter fiscal and political union, or the Eurozone will crumble,” Stewart said in a note to clients.
He adds, however, that he’s sceptical that Federalisation can work in the long term.
“Germany will accept substantial short term transfers and monetary creation in exchange for much tighter political control at the European level,” he said.
“The democratic deficit will become ever more apparent as voters still remain attached to national politicians who will be increasingly impotent.
“Longer term, this is a toxic mix indeed. Short term, markets will sigh with relief, rally hard and worry about the sand this European house has been built on tomorrow.”