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Are You Tired of Hearing About Europe Yet?
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It was another brutal week for stocks as fears related to Europe's debt situation dominated headlines. According to CNBC, the S&P 500 logged its worst Thanksgiving week since 1932. [1] Ouch! For the week, the S&P 500 fell 4.7%, giving back almost two-thirds of its October gains. [2]
Another factor that contributed to the poor performance is that trading volume was exceptionally light for the week as investors pulled away from their computers to enjoy some holiday relaxation. The day after Thanksgiving is typically one of the lightest volume days of the year, and true to form, only 3 billion shares (less than half the daily average) changed hands on major exchanges as the stock market closed early at 1 pm. [3]
Even though the U.S. economic picture keeps improving, investors continue looking to Europe for signals. And unfortunately, the signals coming out of Europe are a mixed bag at best. Despite hopes that new leadership can pull the region out of crisis, more countries continue to struggle. Hungary's credit rating was downgraded to junk status by Moody's last week. [4] Belgium, which has struggled to implement spending cuts after 18 months without a government, was downgraded on Friday to AA from AA+ by Standard & Poor's. [5] Italy paid a record 6.5% to borrow money over six months on Friday, and its longer-term funding costs soared far above levels seen as sustainable for public finances. High debt yields from major economies such as Spain, France, and Germany suggest investing in the region is perceived as being more risky. And last week's poor auction of German bonds raised concerns that the debt crisis is spreading to Europe's core. [6] This rash of negative news is really disturbing investors.
To quote Brian Lazorishak, portfolio manager at Chase Investment Counsel "This market is going to continue to be driven by what's happening in Europe. If things seem to be falling apart, nothing else will matter. If it looks like there's a way out - a light at the end of the tunnel in Europe - that could spark a decent rally from where we are now." [7]
[1] http://www.cnbc.com/id/45435459
[4] http://www.businessweek.com/ap/financialnews/D9R7KE4G0.htm
[5] http://www.smh.com.au/business/euro-zone-looks-to-imf-as-belgium-is-downgraded-20111127-1o1oa.html
[7] http://money.cnn.com/2011/11/26/markets/stocks_lookahead/index.htm
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
