Laplace, Louisiana (PressExposure) October 24, 2011 -- The apparent inability of European finance officials and the slowing global economy represent major obstacles for equities in the months going forward. Governments are cowering, banks collapsing and investors running scared as the continent braces for serious belt-tightening measures.
As the troika continues its deliberations over whether or not to provide Greece with the next installation of its bailout and investors worry about the slowing in the global economic recovery, equities are likely to endure an extended period of volatility.
A market strategist at Sanwa Holdings believes, however, that the current price falls represent an opportunity for bolder investors to acquire stocks at considerably lower valuations.
"We think that the sell-off in equities is approaching oversold levels and while we usually advise clients to avoid "catching a falling knife", valuations are looking particularly attractive," he stated.
The European Commission predicted economic growth would come to a "virtual standstill" in the euro zone during the second half of 2011. It lowered its estimate for third quarter growth to just 0.2%, while its forecast for the last three months of the year is down from 0.4% to 0.1%.
While the commission says weakening demand outside Europe and financial market problems are responsible for the slowdown, it remained confident that the euro zone would not fall into another recession. "Recoveries from financial crises are often slow and bumpy. Moreover, the EU economy is affected by a more difficult external environment, while domestic demand remains subdued," said EU Economic Affairs Commissioner Olli Rehn. "The sovereign debt crisis has worsened, and the financial market turmoil is set to dampen the real economy."
Sanwa Holdings says that, although the US dollar has been the main beneficiary of the liquidation, it does not expect the greenback to reverse its long-term downtrend.
The firm is known to be particularly bullish on junior mining stocks and oil exploration stocks and is thought to be preparing to issue a statement reiterating its faith in both sectors.