Market Weak ... But U.S. Recovery Will Continue

By Bill Stone of PNC Wealth Management

NEW YORK (TheStreet) -- Setting aside the strange happenings around yesterday's plunge, the fact remains that the market was weak in general and is now 7.5% off the peak on April 26. This weakness spread beyond stocks and really encompassed all risk assets. One doesn't need to stretch to see the fear of contagion surrounding the Greek situation as the proximate cause of the recent weakness. As we wrote in our May Investment Outlook: The continuing travails of Greece might also provide an occasional reason for market weakness "â? though the Greek fiscal situation is not likely to lead to contagion in our opinion, the players in any bailout have every reason to stall and push Greece to enact as many austerity steps as possible. The market has now rallied more than 80% since March 2009's lows without as much as a 10% correction "â? that fact on its own is reason for some caution. Certainly an investor could point to any of a number of reasons for market weakness in addition to Greece including: uncertainty regarding Financial Reform Bill; Goldman Sachs' legal situation; China's fiscal tightening; and elevated bullish market sentiment. Current Focus In our view the primary cause of the weakness is the concern that the Greek situation combined with any or all of the issues detailed previously might derail the global economic recovery. Investors remain skittish and scarred by their horrific experience during the financial crisis, so the alternating periods of fear and greed might be frantic, as we caught a glimpse of yesterday. In many respects the Greek issue is more of a political crisis within the euro-zone than a true economic situation at the moment. Greece is rarely considered a pillar of economic strength because it has a long history of bond defaults and most certainly was not counted on to be the economic difference maker at roughly 0.6% of global GDP. The bottom line is that we expect the global and U.S. economic recovery to continue, despite the occasional bumps and bruises. Interestingly, the turmoil is likely to benefit Germany and other euro-zone exporters to some extent because the decline in the euro could prove to be a boon to export competitiveness. German industrial production for March was reported this morning at a much higher-than-expected 4% growth rate.   Loading Comments...   1 2 Last » Next â?º

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