After a roller-coaster first half of 2012, investors have sadly found themselves stuck in deeper economic turmoil.

Not only has the European debt woes kept haunting financial markets, but the global economy has also shown more signs of slowing down.

Looking ahead, analysts warn that given all the uncertainties, the world's financial markets are likely to suffer additional volatility in the coming months.

ROLLER-COASTER FIRST HALF

Divergence between stocks and fixed-income markets re-emerged in the first half of 2012 and it favored fixed income.

Major U.S. indexes posted strong gains in the first quarter, but that was soon followed by significant losses in May due to the worsening European debt crisis and weak American economic data.

By far, the blue-chip Dow Jones industrial average has erased all its 2012 gains while the broader Standard & Poor's 500 has fallen nearly 8 percent from its recent peak on April 2.

Greece, battered by the debt crisis in Europe and facing the risk of having to drop out of the eurozone, saw its benchmark stock index tumble to a 22-year low.

Meanwhile, the Euro STOXX 50 Index of large European companies also plunged 20 percent compared with its 2012 high.

Commodities, too, suffered a heavy sell-off. Until June 11, U.S. benchmark WTI has fallen under 83 U.S. dollars a barrel and London Brent crude broke 100 dollars a barrel, both falling more than 20 percent from their 2012 highs.

MOUNTING RISK AVERSION

Kate Moore, global equity strategist for Bank of America Merrill Lynch, said her bank has not changed its "neutral" stance on equities since November -- which means a 35 percent allocation to stocks. The emphasis was on large U.S. companies, she said.

Morgan Stanley's Smith Barney since October has preached a diversified, more cautious mix of investments steadied by bonds, cash holdings, and an underweight 33 percent allocation to stocks.

The City National Asset Management also eliminated nearly all of its exposure to European equities in May, according to its chief investment officer Bruce Simon.

Out of mounting risk aversion, investors fled equities and commodities and turned to safer assets, driving the yields of the U.S. 10-year bond to below 1.5 percent for the first time in history.

"The worsening European debt crisis drove capital away from riskier assets to safe havens. And the panic withdraws from banks in Greece and Spain also pushed Germany and U.K. bonds higher," Victor Lee, managing director of the Oppenheimer Fund, told Xinhua.

"Again, cash is king in this market," he said.

EUROPE REMAINS BIGGEST FEAR

John Praveen, the chief investment strategist for Prudential, told Xinhua that the troubles in the eurozone have been on everyone's minds.

"We have always said that apart from everything else the global economy and the global markets are going to be under the shadow of the euro zone during this year and that is exactly what has been happening," Praveen said.

The European Union decided over the weekend to lend Spain as much as 100 billion euros (126 billion dollars) to rescue its banking system. The size of the aid package was larger than previously expected and initially spurred a relief rally in equity markets around the world.

However, enthusiasm soon faded amid concerns about the details of the bailout and skepticism that any fundamental issues really have been solved.

"It just kicked the can down the road. It doesn't really solve the fundamental economic problems, not only in Spain, but in anywhere else," said Kenneth Polcari, managing director of ICAP Equities.

"That's the same story we've seen with Spain, Greece, Portugal and Ireland. They gave all these countries money and nobody was dealing with the structural problems," he said.

Meanwhile, the upcoming Greece elections have also put investors on edge. If the party that's against the current austerity plan wins, the debt-ridden country may have to exit the euro zone and in the process cause more turbulence in global financial markets.

"If the leader of leftist party wins, I think Greece will ultimately end up with exiting the euro zone, and it will be kind of ugly," Polcari said.

U.S. FISCAL CLIFF

While troubles in Greece and throughout the euro zone dominated headlines and became the biggest mover in financial markets, strategists also pointed out that a slowdown in the world's largest economy should get serious attention. The surprising rise in the U.S. unemployment rate in May, they said, was a wakeup call.

What's more, the American economy will soon face another serious challenge known as a "fiscal cliff."

"It is unlikely that the cliff is fully priced into the markets," said Ethan S. Harris, North American economist for Bank of America Merrill Lynch.

Harris recently prepared a lengthy analysis on the effects of the so-called fiscal cliff -- a term coined by Federal Reserve Chairman Ben Bernanke to describe the automatic financial triggers that would occur if Congress doesn't reach a deficit-reduction agreement before the end of the year.

Harris predicted that the fiscal cliff triggers would impose a total damage of close to 720 billion dollars, or 4.6 percent of GDP, on an already sluggish U.S. economy.

MORE TURBULENCE FORECASTED

With all of the uncertainties looming over the market, Robert Smith, president of Peregrine Private Capital Corp., pointed out that a lot of factors can well define global financial markets in coming months.

Smith cited the continuing crisis in Europe, the results of the upcoming U.S. presidential election, a deadlocked Congress on deficit cutting and disagreements on how to stimulate a tepid economy.

Goldman Sachs Inc. said in a mid-year report released June 1 that the most likely scenario is that Greece will remain in the euro zone after its elections. But "financial contagion or crisis in Spain" could prompt a bear market drop of 20 percent for the S&P 500 since its 2012 closing peak of 1419.04 on April 2.

David Kostin, chief U.S. equity strategist of Goldman Sachs, said in the report that the S&P 500 might fall to 1,125 if the situation in Europe worsens.

Goldman Sachs also predicted that a Greek exit from the euro zone could push the Stoxx Europe 600 Index down a further 3.8 percent to 225 and a policy response considered not credible or bank disruptions in other countries may send the European gauge to its 2009 low of 158.

"People are already preparing for Greece's exit," Raymond Carbone, president of Paramount Options, told Xinhua. "But now the bigger fear is Spain and Italy."

He predicted even cheaper oil in the next six months if there were no credible solutions against the debt crisis.

Carbone also thought China would be an important factor in determining the future markets.

Where China's economy is heading to and how the Chinese government will respond will "provide another shot of insulin to the broad market," said Kirk Howell, chief operating officer of SunGard's Kiodex.