Gartmore's European team cautiously optimistic

The tide is beginning to turn. For many investors it is time to look on the brighter side of things following what has been the worst recession in living memory say Roger Guy and Guillaume Rambourg, managers of the European Selected Opportunities, SICAV Continental European and European Absolute Return Funds. According to the managers, the recent uptick in key surveys such as the ISM non-manufacturing number and IFO surveys, as well as the SAAR number (annualised vehicle sales in the US), supports the view that the worst may well be behind us. Even the most bearish strategists anticipate that most economies will begin to rebound later this year.

"The restoration to health of the housing market, the biggest asset class in the world, remains an important element for economic recovery due to its influence on domestic consumption and investor confidence", argue Roger and Guillaume. Anecdotal evidence of some form of stabilisation has led to US homebuilder confidence reaching its highest level in eight months in May. Reports of healthier banks and improved liquidity conditions - the VIX is back to pre-Lehman levels - all point to a recovery according to the managers.

"Yet, while there are tentative signs of a recovery and much talk of budding greenery, key indicators remind us that we are not out of the woods just yet", caution the managers. There is still no genuine good news on the macro or corporate level - something that a lasting bull market relies on. GDP is expected to contract in the eurozone and UK this year. Until GDP begins to accelerate and global growth is back on track, it makes sense to stay cautiously optimistic over the economic and market outlook believe Roger and Guillaume.

"There is a danger that a degree of complacency is creeping into the market, driving investors to whole heartedly embrace the belief in a ‘V shaped recovery'. We believe there is scope for a recovery in the global economy, but at a measured and gradual pace, rather than a strong snap back to 2007 levels".

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