Although market participants continue to remain wary as ongoing macroeconomic uncertainty looms, there are signs that there may be a turn for the better.

Initial public offering activity was slow during the second half of 2011, as market uncertainty and high volatility left many companies gun-shy. However, signs are beginning the point the other way. Market participants expect to see a recovery in the primary market during the coming quarter, according to research conducted by Deutsche Borse. In addition, price gains seen in German equities and a decline in market volatility are expected to also boost the number of new issues.

“The uncertainty on the capital markets continues to influence the primary markets,” said Deutsche Borse in its report. “At the same time, there have been the first encouraging signals which could indicate a trend reversal. Volatility in equity markets has significantly declined and the DAX (Deutscher Aktien Index, a German blue-chip stock market index) most recently recorded price gains. Accordingly, we observed a slight upward trend in the IPO climate. According to our survey, market participants expect a slight recovery of the primary market in the upcoming quarter.”

Deutsche Borse’s research was conducted by surveying decision makers at banks, issuers and investors. Traditionally, the first quarter has always been weak regarding IPO activity, due to the fact that companies prefer to publish their annual balance sheet for an IPO. Should a turnaround occur, it would probably become apparent in the second quarter.

Most of the concerns facing investors for much of 2011 have still not been alleviated. Europe’s debt crisis is still front and center, while the U.S. economy continues to be stagnant amid high unemployment and the presidential election looms on the horizon. Investor confidence as a result has remained depressed.

“The bubbles have burst, and there’s nothing else to burst,” Pedro Antunes, director at the Conference Board of Canada told Markets Media. “Companies are cash flow positive, businesses have fixed their balance sheets, industrial production, exports, those are up and doing well. We’re waiting to see the last piece, to tie that better performance on the business side.”

However, the positive signs have been there, as companies have posted relatively strong earnings. The fundamentals are there, it is the investor confidence that is still reeling.

Market volatility has been on a wild ride since mid-2011, both stateside as well as abroad. The VDAX, which measures the implied volatility of the DAX index, went from under 20 to above 50 from July to October. It reacted to several macroeconomic events, including the debt ceiling deadline in the U.S. to the ongoing European debt crisis. It has since settled to about 25 as of mid-day Jan. 30.