This week, our Stress Indicators again show limited risk aversion - true this morning, the sell-off can be seen in Italy's fixed income market, but the reaction is still short of even catching up to its 200-day moving average.
I have noted a few times that complacency looks high. Today and over the weekend I read pretty much all of our peers' research and predictions for 2013:
- Not a single one sees any risk of US or European equities falling next year - not one.
- The average expected Europe ROE is >20% and in the US >15%
- 95% of them think the Fed will expand its balance sheet by another USD 0.5-1.0 trillion
- Most see EURUSD higher
- Recovery of flows into Europe
- The one divergent issue remains Japan - some people see a recovery in earnings - and flow induced reweighting of Japan to the tune of USD 50 billion or more, but most see more of the same.