Archive

Economic Calendar       Archives        About

Inside the Market

11/21/2011

Is the biggest threat to US growth the potential contagion from Europe…probably not.

With the continued saga over the plight of the Eurozone heightening in intensity, US markets remain in a state of flux.  Headlines regarding the solvency of Greece, Italy, Ireland and even France have dominated the tape and investors and traders have ridden a wild and dangerous roller coaster, given massive fluctuations in Stock, Currency, Bond and even precious metals prices.  Simply put, all eyes and all blame have been placed squarely on the instability of the Eurozone and potential fallout from its chaos.

But is the US domestic economy really all that stable, where if it were not for the Eurozone factor, things would be so positive?  Last week’s data of GDP, Initial Jobless Claims and retail activity got bulls sounding out and alluded to the fact that things are well in the US.  But before one gets too excited, remember that this holiday season should depict short term increases in employment (also the initial claims number does not account for unemployment benefits that have run out).  Also remember how former, seemingly positive GDP numbers, quickly were revised to the near zero growth zone.

Employment remains a serious US problem, housing remains anemic, individuals borrowing from retirement accounts to meet expenses is on the rise, social instability in the form of formal protests have sprung up, the US national debt stands at $15 trillion, only a mere $5 trillion higher than in 2008 (that’s sarcasm there)…wow is that a 50% increase?...and political gridlock resulting in no action to address the issue continues.

So do you really think its all about Europe?  Perhaps the Europe factor is so widely feared because another shock to the system, even if it comes from across the Atlantic, will exacerbate an already alarming situation.  Remember, many serious US problems don’t stem from the Eurozone, they are rooted domestically.  So is it all about Europe??? We’ll just say a good chunk of short term stock fluctuations and added risk to an already serious situation are.