Davos: Why doomsday prophecies for 2012 are wrong

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Davos: Why doomsday prophecies for 2012 are wrong

Analysis by Ned Davis Research suggests apocalyptic predictions about financial markets in 2012 are unjustified. Eurozone Europe will lag, but much of the rest of the world can expect a pick-up.

Gloom and doom became the norm in 2011, ahead of the year when the world is supposed to end. Inspiring the disaster movie that started filming around the time of the Lehman implosion, the doomsday prophecies for 2012 have included everything from a meteor strike, to a geomagnetic reversal, to a visit by aliens. And the latest take on apocalypse is the death of the euro and the after-shock of hyperinflation or economic depression – take your pick. The Armageddon chatter and contagion talk has continued to weigh down consumer confidence globally, in the eurozone as well as in the UK, US, Japan, China, and other countries. And worried investors have continued to seek the comfort of the herd, acting in unison. The result has been an unprecedented number of one-sided trading sessions since August. The vast majority of shares and stock prices have been moving in the same direction, with the daily gyrations unusually high, as reflected by the S&P500’s mean daily change over the past 100 days. At the same time, correlations remain higher than ever, with the risk-on beneficiaries outperforming together on rallies and the risk-off indices outperforming together on sell-offs.

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