The financial crisis has come to an end…

Péter Kadocsa
Chief Executive Officer & Chief Investment Officer

The last few weeks have seen an increasing number of reports and opinions variously published and aired stating that the “crisis” has come to an end – that we can already see the light at the end of the tunnel. Although it might well be too early for such proclamations, it does seem likely that the period of the financial crisis that saw banks and countries threatened with bankcruptcy is indeed nearing the end. At the peak (or should we say low-point?) of the wave of credit expansion that swept the entire developed world over the past decades, two years ago the financial crisis arrived, leading, in the recent period, to capital-market panic and to a deepening economic downturn, and to all the attendant effects evident to every one of us. During the course of last year, the financial crisis, widely dubbed the “subprime crisis”, worsened into a credit crisis as a result of enormous bank write-downs which weighed heavily on the economy in the form of a reluctance of the banks to lend to each other, an increase in the costs of funding, and a narrowing of the credit market.

The last six to eight weeks have seen a favourable turn in the equity markets, causing some relief for the holders of risky assets: by mid-May the majority of the international stock indexes had made up the losses of the first quarter. Could this be the start of a sustained recovery? Are we in the early stage of a bull market, or is it just a “bear-market rally” – a temporary correction in an otherwise falling market?