A Resilient Market

• Posted by Robert Sinn
• on June 14th, 2012

Does anyone find it curious that US equities have held up relatively well as Europe deals with an unprecedented crisis of unfathomable proportions? It seems to me that markets know that central bankers and policymakers will manage to launch some sort of easing/intervention actions over the next several weeks. Gold’s $100/ounce rally from the depths of the abyss over the last two weeks also adds credence to the central bank easing thesis. Moreover, it would be unthinkable for the ECB (a central bank that already has a $3 trillion balance sheet) to give up now after all it has done to stabilize the situation over the past several years.

While the eurozone’s challenges certainly won’t be solved by additional monetary easing or another promise from policymakers to embark upon closer banking/fiscal/political integration, it will likely bring some short term relief to markets. How long will this relief last? Your guess is as good as mine. It is my opinion that the eurozone in its current form and size will ultimately be unworkable, however, that has very little to do with what will transpire over the coming weeks and months. As a market participant it is worth noting that in the face of a seemingly endless barrage of negative news US equities have held up well and still remain in the green for the year – this tells me that the risk is to the upside, at least for the near term.

To say the current market dynamic is fluid would be a huge understatement – of course there is more than just Europe affecting markets. However, until China takes another leg lower in its growth outlook or the US firmly steps into recession, markets will remain almost entirely focused on the evolution of the eurozone debt crisis.

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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