Markets performed quite well this week across the globe, but let’s not get our hopes up so high. European fundamentals still haven’t markedly changed while Greece’s fate is still in the hands of its bondholders. In other words, don’t jump full on into equity ETFs.
This week’s video from Nouriel Roubini and Ian Bremmer highlights some of the risks plaguing the global financial system. Not only is Europe stagnating, but China’s growth is slowing down, revealing the extent of the global recession. With China already in a currency war with the U.S. that will only get messier as China’s exports slow down, the eco-political tension will surely heighten.
Furthermore, the general process of deleveraging in Europe and the U.S. continues to have a negative impact on the global economy. In addition to the uncertainty surrounding whether Greece will default, Dr. Doom believes other PIIGS members will have to restructure their debt. However, this would be an insurmountable task for Italy and Spain, who collectively account for nearly $4 trillion in debt.
With mounting economic challenges in Europe and China as well as Middle East instability for that matter, we are certainly in a risky market environment, which supports my view that an exit strategy for your investments is an absolute necessity.