Glen Gilson: Doomsters predict more disastrous falls on horizon, so stand by for better days ahead

Reaction to the austerity drive has resulted in a defensive public, leading to a vicious circle of retrenchment in the economy.

This was long overdue, as in 2008 consumers had become overextended, but in 2012 some bounce-back is now overdue.

It is far from clear whether true austerity has happened at all in the public sector as the numbers do not suggest that the process is actually underway in more than name. As a large part of GDP is public spending it is not surprise that public spending austerity measures appear to be a mirage.

Where does it leave the investor? Sadly we are left generally in the dark.

It is no good investing without an investment premise or a view about what is to come. Somehow we need to have at least a sketchy map to navigate the impact it will have on our personal finances.

Investors, therefore, have to make their mind up as to the big picture and try to fathom how things will pan out in the years ahead.

Frankly, it is a tricky call as to whether the UK and Europe are finished or able to make a comeback.

Even the German economy, a perceived bastion, is in a position where once its level of state debt would have triggered default.

The desperate straits of southern Europe and the future crisis of France, the US and Japan cast a pall over the future and promise nothing but more desperate times.

So on the surface the future is grim. Yet this crisis kicked off on 2007 and that’s a long time to suffer a recession. Recessions normally come and go in a year or two.

Let’s not be so pessimistic. Things generally do turn out OK in the end, and on the face of it we should be well through this mess by now. So we’re either in a worse mess than the “great depression” or, under the surface of our economy obscured by a depressing mood of negativity, there is a recovery underway.

Catching a recovery early is one way of making great returns on your investments; it is simply down to being brave and canny.

What can been seen if we screw on a positive mental attitude?

There have definitely been signs of recovery in the US. In Southern California the German cars are reappearing as if some economic migration is bringing the flocks slowly back to the coast.

Stock markets, at least for now, aren’t looking too bad and are within shooting distance – 15 to 20 per cent – of previous all-time highs. The doomsters are saying we are riding for yet more disastrous falls, a classic positive contrarian sign of better days ahead.

There are reasons to be bullish.

Counterbalancing these reasons is that China is definitely having a hard economic time of it. But then it is hardly surprising as the Chinese government has turned off credit to stop a housing boom from bubbling up.

China fears property bubbles might eviscerate its economy in the same way Europe was gutted by such false economic growth. With the money supply choked off, it is hardly surprising that the Lamborghinis are piling up at the docks in Shanghai.

What happens when the money spigot gets turned on again?

China won’t be on the back foot for long. Unlike the chronic over-regulated first world, the developing countries will bounce back as fast as they tumbled. That recovery is not far off. If you think 18 months out, not only will emerging markets be bouncing back, but so should the West. It could be that the world will recover from this depression in tandem.

The desperate market bull always talks about a stock collapse as being like a coiled spring due to bounce explosively back – they are just desperately hoping that a miracle will save them. Yet this time I am tempted to believe there could be a coiled spring as the possibility is not a silly as it sounds in these dour times.

• Clem Chambers is chief executive of stocks and shares website ADVFN.com and author of 101 Ways to Pick Stock Market Winners, out now.