I wouldn't count your chickens just yet. One obvious reason for such exuberance is the ECB's recent launch of its long-anticipated programme of unsterilised quantitative easing. Investors are once again betting that a dose of government bond buying will lift all boats, even if – as Stephen Wilmot argues in his Taking Stock column on page 56 – there is no clear cause and effect between QE and equities' performance. Stephen suggests that we should not be complacent that euro QE will deliver the hoped for economic benefit, and that the market's gains could, as a result, be temporary.
There has also been relief that the newly elected Syriza party in Greece does not appear to be taking quite as hard a line in its bailout diplomacy as many suspected it would. Markets were understandably nervous in the immediate aftermath of Syriza's victory, but have since been becalmed by the apparent willingness of its leadership to remain within the EU and conduct an orderly renegotiation of its debt. The prospect of a Greek exit from the eurozone has, many therefore believe, receded.
I would suggest that we are perhaps being too complacent. Syriza's "libertarian Marxist" leadership do not think in terms of the economic and political conventions that have been established in the wake of the credit crisis. They have made an electoral promise to free Greece from the crippling burdens of debt and austerity. So for all their current overtures to the EU's financial leaders, what happens if they do not get what they want remains a major unknown. With Germany, for one, seemingly unwilling to offer further debt relief - and Syriza's leadership clearly up for a scrap - we may find out. As Chris Dillow argues on page 13, that won't be good for equities.
Meanwhile, although the current risk of financial contagion should a disorderly default occur is small, the risk of political contagion is undoubtedly rising. Spain's left-wing Podemos anti-austerity party did not exist a year ago but now, according to polls, could pick up a quarter of the country's vote. Its members took to the streets of Madrid this week, and any concessions made to Greece will surely embolden such movements to demand their own.
The likes of the World Economic Forum have repeatedly said that rising income inequality, exacerbated by austerity programmes and mass unemployment, is one of the biggest threats the global economy currently faces. Few could argue that closing this gap, as the likes of Syriza and Podemos believe they can do, would be a bad thing - but investors should not underestimate the upheaval they face as the world moves towards such a fairer equilibrium.
