Making Money Alert
While Europe Sorts it out
09/14/2011
The blaring sound of volatile trading continues to ring throughout trading floors around the globe, as investors try to figure out if this market is worth buying, or if they should run for the hills. Last week’s market action was decisively to the downside, but true to volatile form, today’s market saw a whole lot of green.
One huge bit of uncertainty fueling all of this volatile trading is Europe and its debt issues. The market has all but priced in a Greek debt default, and that’s caused European markets to crater. The chart here of the iShares Europe 350 (IEV) clearly shows just how much downside the troubled region has seen since early August.
Of course, stocks here in the United States also have cratered since early August. Though domestic markets have come back a bit further off of their recent lows than European stocks, the S&P 500 remains below both its short-term, 50-day moving average and its long-term, 200-day moving average.
I expect to see a lot more volatility on the horizon, as there still is no clear answer, or “fix” if you will, from the rest of the EU nations over Greece’s debt. More importantly, there are much bigger debt troubles looming in Spain and Italy. The Italians have been smart enough to enlist the help of the only country right now with the fiscal prowess to bail them out, and that’s China. In fact, confirmation of a meeting between Italian and Chinese officials late Monday was one of the catalysts for the recent bounce in stocks.
Yet even with China’s involvement, there still isn’t any clear path toward a debt fix for Europe. Until the region sorts it all out, look for more volatile price swings, and more nail biting from investors.