European Debt Crisis Affects Investments
Rob Silverblatt and Ben Baden
In a turn of events capable of giving even the most seasoned traders a bad case of whiplash, global markets snapped back to life
following news that the
The creation of the fund, which will be used to contain the debt crisis that's raging throughout the euro zone, calmed the fears
of the very same traders who led a mass exodus from stock markets throughout the world. It also sent stocks
Reports of the exact value, in U.S. dollars, of the package have differed, but according to the
"What we can say for certain is that absolutely nobody out there thought that the European policymakers would be able to come
out with something this large, this comprehensive, with this much breadth and depth to it," says
Perhaps the package's most attractive feature is that it aims to reduce the extent to which
Despite the initial confidence boost, a number of questions remain unanswered.
Chief among them is what
"This is a rescue operation, and a rescue operation is never going to solve the problem; it just contains the problem and
As this situation gets sorted out across the Atlantic, investors will likely find the global markets increasingly difficult to navigate in the months ahead. In fact, for most investors, even the past several days have been nothing short of mindboggling.
Last week alone, the
With that in mind,
We're all in this together.
A year ago, most investors would have scoffed at the idea that a country like
An addiction to safety. Generally, U.S. treasuries are considered to be some of the most conservative investments out there. When investors get scared, they generally flock to safety in high-quality bonds like treasuries. That's what happened last week as investors crowded the treasuries market and drove up the prices of long-term notes. "For about a year now, there's been a lot of pessimism about U.S. treasuries," says
Sovereign debt: Will it blow up again?
The amount of sovereign debt -- or debt issued by governments -- is a growing concern in many developed nations.
Tricky questions for foreign bond fund investors. For bond investors, the long-term implications of the European rescue package still aren't clear. "What this does in
A rush to the door.
After a mass selloff that eerily resembled what investors came to expect during the recession, the U.S. stock market tanked last week. On Thursday alone, the
Promising opportunities for U.S. stocks.
Despite last week's falloff, some experts say the fundamentals of many U.S. companies look appealing. GDP growth of upwards of 3 percent in the first quarter, a better-than-expected jobs announcement last week, and high earnings across the board are all signs that the U.S. economy seems to be growing stronger. "In the U.S., it's a good environment for equities," Zemsky says.
The U.S. dollar's seesaw ride.
The beaten-up euro sent the greenback flying last week. At first blush, the dollar bill's increasing value seems like a good thing, but it can actually be quite detrimental. That's because it eats away at the profits of U.S. companies that sell their products abroad. "That can be just about any major company in the U.S. these days," says
The gold rush.
Gold, which has long had a reputation as the panicked investor's best friend, shot up to $1,200 per ounce last week. But following Monday's calming news, it tumbled off of that peak. Going forward, gold investors will face a number of nagging questions. For starters, is inflation a big concern? And will investors continue to panic about
Last week was a scary time in the global stock markets, but Monday's rally may give some relief to nervous investors. Benz says it's important that investors stay diversified outside of
A short fuse.
As recently as last week, buying credit default swaps on the PIGS (
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European Debt Crisis Affects Investments
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