Last week, the US Federal Reserve, ECB, and monetary authorities of several other leading nations, came together to cut costs of emergency funding to EU banks, in a coordinated effort to help alleviate bank funding concerns and improve market functionality. While this action did not solve fiscal problems, it brought some much needed stability to the EU markets at a crucial time. Global stock indices rallied sharply on the news, ending an 11-day slide.
All eyes will continue to focus on European leaders, as they discuss plans to form a closer fiscal union during their Dec 8-9 financial summit. Global stocks will likely react heavily to perceived progress, or lack-there-of, following the summit. The debt crisis has had a profound dampening effect on economic growth in Europe, and its nations will have a long road to full fiscal recovery.
News in the US has been much more positive. Retail sales, existing home sales, and several other key economic reports issued in the last week, showed improvement in the US economy. We continue to advise investors to focus on quality assets with strong fundamentals. A well-constructed portfolio of high quality assets will serve investors well as they ride out continuing market volatility.
