In the following I have tried to sum up in ten points my analysis of the economic and financial situation.

This time last year, I wrote that the New Year tradition of making forecasts for the year to come was an even more perilous exercise than usual. My reasons at the time were linked to the lack of visibility on the economic situation and the uncertainty on the banking landscape.

There is no doubt that the recovery on the equity markets since March has been impressive. Since their lows of 9 March, the European and US markets have bounced back by around 45 %, while for some of the emerging markets, the figure was closer to 100 %.  And although the sharp recovery that started in March seemed to be gradually losing steam by May, the markets began soaring again in mid-July.

As I mentioned yesterday in my article in the "Analysis" section of the blog, I believe that the expectations of economic recovery behind the rise in risk assets since March will be short-lived.

The first two quarters of 2009 couldn’t have been more different on the financial markets. While investors exhibited strong risk aversion in the first quarter, the second quarter saw the very same investors return to equities and high yield bonds.

In my article from one month ago ("Some encouraging news"), I came up with a list of 10 things I thought policy actions should achieve to deal with the crisis and the various measures that had already been taken.

After the dramatic fall in stock prices last week, we are reducing our underweight position in equities.

Despite much stronger fundamentals, emerging market share prices have experienced a sharp selloff, with the MSCI Emerging Markets index falling by nearly 40% since 19 May. For a long-term investor, this creates very attractive buying opportunities.

The $700 billion bailout package that the US Treasury Department has submitted to Congress finally addresses the root cause of the current crisis by aiming to remove distressed assets from the financial system.

With equity markets having lost around 25% since their 2007 high, it is tempting to believe that the worst is over and that current stock prices represent a buying opportunity. Investors should resist that temptation.