Equity markets set to rally next year – Skandia

The eurozone debt crisis will be resolved in 2012 with equity markets set to stage a strong recovery, according to Skandia Investment Group (SIG).

A number of eurozone countries will continue to struggle over the next few years with deficit-reduction measures, it said.

But SIG reckons 2012 will be a "year of healing" when the global economy is no longer undermined by the crisis inflicting the eurozone.

"We expect the eurozone crisis to be resolved in the first half of 2012, leading to increased confidence and a stronger global economy in the second half of the year an into 2013," said SIG head of asset allocation Rupert Watson.

Skandia expected equities to deliver positive returns in 2012 on the back of low valuations, improving investor sentiment, a resolution of the eurozone debt crisis and strong corporate profits.

Despite the optimistic outlook for next year, SIG said the global economy remains in a perilous state in the short-term.

This is especially so in the eurozone with Italy, Spain, Portugal and Greece all likely to face "deep recession", it said.

"As we enter 2012, the outlook for the global economy is very poor," said Watson.

"Most economies, with the notable exception of the US, slowed sharply in the second half of 2011 and are poised to register weak growth in the first half of 2012."