There is an interesting piece by John Dizard on FT.com where he lays out his view that investors have over-discounted the possibility of another European crisis.
Sorry to sound cynical, but I am just not convinced that there has been any magic disappearance of European risk.
American investors who make decisions by weighing sell side research or listening to cable news are underestimating the risks of the fragmentation of the euro area’s economies and banking systems. Europeans are far more aware of the degree to which banking systems and government bond markets have become renationalised, with proportionately much thinner cross border capital flows.
I think he is quite right. While the waters may have calmed, the pressures that caused the storms are still lurking beneath the surface and it would not take much, say a serious rise in U.S interest rates or a sudden political crisis in a major European country, to raise them again.