Speaking with top hedge fund managers, policy makers and bankers gives one a different perspective. We recently had the chance to discuss market views with a highly influential person in the European crisis. The view was that the “Italian crisis” was truly one of leadership – though that has been used all too frequently in recent months. This official believed that Italy, due to its massive wealth and deep capital markets, could survive the recent spike in borrowing costs and risk aversion. In other words, that it would not go down the path of Greece, Ireland and Portugal.

Then Berlusconi steps down, in comes Mr Monti. He is often called a technocrat. What is a technocrat? According to dictionary.com, it is defined as one who is a technical expert, especially one in a managerial or administrative position. Many ‘smart money’ managers we have spoken to recently have felt very passionately that Monti is without the support of the populace and that this will be another failed attempt by European policymakers.

Interestingly, today Mr Antonio Borges of the IMF (director of Europe) stepped down. Markets have sold off aggressively in the past week. Markets sold off pretty aggressively after the announcement.

Since October however, markets are largely unchanged with the S&P hovering between 1220 and 1280. This goes to show that markets are largely discounting very little from the day to day noise and widely fluctuating markets with no clear trend are very possible. It is for this reason that we adhere to our approach of sticking to the fundamentals, keeping an eye on sentiment and technicals, and letting the data speak for itself.

This is not a time for trading in and out of positions, but it is definitely a time when a tactical asset allocation is key.