By Greg Peel

"Considerable risk in Europe certainly remain," note the Deutsche Bank Australian equity strategists, "but with changes in key governments there may be progress from here".

Deutsche Bank is not alone in this view. After the disastrous months of August and September, in which it looked like Greece may have to exit the euro, anticipation from early October of a definitive plan to save Europe saw global stock markets stage a significant bounce. While questions remained as to whether the plan to leverage the EFSF to E1trn went far enough, or whether the E106bn set aside for European bank recapitalisation went far enough, the world largely took the plan to be the first realistically positive step in the whole European debacle for two years.

Everything was going swimmingly until political issues reared their ugly head in Greece and suddenly Italy hit the spotlight as well. Political issues also became the focus in Italy and another period of market volatility ensued. But now that both Greece and Italy have settled on new technocrat governments, where are we left?

Well judging by Wall Street's ridiculous response last night (the Dow fell 150 points in less than an hour) to a screamingly obvious assessment from rating agency Fitch that the US banking sector would be impacted were the European crisis not to be solved, we remain on the edge of a precipice and will jump off at the sign of any shadow.

However those more inclined to dismiss intraday swings and roundabouts and look towards a longer term investment horizon, such as equity strategists, have become more inclined to think the European issue is now on a path to resolution. At the very least, strategists such as those at Deutsche feel that now is the time to start preparing for a new rush in the "risk on" trade.

Deutsche notes the recent run of economic data, particularly from the US and China, has been solid. In terms of data "surprises", they've stopped being negative and started being a bit more neutral. In a similar sense, US corporate forecast earnings revisions have stopped leaning to the negative side and appear to have bottomed post the September quarter reporting season ? an event which historically precedes a market bounce. And the gap between forecast market dividend yield and the benchmark bond yield has increased to near thirty-year peaks, suggesting attractive valuation.

Perhaps most importantly, investor positioning remains defensive, notes Deutsche, and may soon need to be unwound. Short stock positions are near record highs and hedge funds were well underexposed to equities at the end of the September quarter.

On the basis of all of the above, the Deutsche strategists have decided it's "time to take the leap" and move to a more bullish stance, having been conservatively positioned since August.