Some European stock investors may think it's only clear skies ahead: with feet propped up, chairs tilted back, and hats slid over their eyes.
European bourses seem to be on automatic pilot -- gliding over a "here to stay" cushion of air. Why worry about turbulence?
The British and German measures of stock market volatility are similar to the VIX in the United States. The just-published February European Financial Forecast (EFF) references the VDAX and the VFTSE:
"After spiking to 15-month highs during the April-May 2010 declines, last month's implied volatility sank to a three-year low, a powerful long-term illustration of the complacency with which traders are now viewing stocks."
The chart below shows the price pattern of Germany's DAX Index, and also graphically displays the VDAX and VFTSE over the same time period:
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True, European bourses have been levitating lately. And this levitation act seems to trump the recent crises in Greece, Ireland, and Portugal. And the bigger financial crisis of 2007-2008 is an ever-smaller memory. When investor optimism has the upper-hand, market participants can always "reason away" other troubling financial or economic facts.
How high is market exhilaration running? In Great Britain, stock market bulls are at 93 percent (trade-futures.com).
The optimism doesn't stop with stock market investors. Here's an excerpt from a Bloomberg report from Davos, Switzerland as the recent World Economic Forum wrapped up:
"Finance executives [say]...this year they were able to relax...the panel discussions on executive compensation were gone. The topic of financial regulation was also noticeably absent...According to one London-based delegate, nobody discussion recession, let alone depression, this year. On the contrary, everything was 'business as normal.'"
Business executives may paint a rosy outlook in Davos, but unemployment in the eurozone exceeds 10 percent, and youth unemployment is far worse. Great Britain's jobless rate exceeds 20% for the working-age young. Some other eurozone countries have much higher 16-24 year old jobless rates. This reality has contributed to low consumer confidence. The average person's economic outlook contrasts starkly with what financial analysts say.