Surprise Party

Shock and awe.

That’s what the European central bankers hoped to produce with their trillion dollar plan. On the face of it, they did just that. Global markets recovered about 5%, or half of the $3.7 trillion decline they’ve seen since the debt crisis hit the markets late last month. Some say the bailout doesn’t have enough teeth to force fiscal restructuring; some say they’ve come too late in the process. But no one has said it isn’t enough.

The Euro-zone has an economy almost the US. And their aggregate level of public indebtedness is about the same as ours. Now they’ve come up with a plan bigger than our TARP fund to shore up the finances of the marginal countries that threaten the Euro as a currency. This isn’t unreasonable. The TARP worked to stabilize the banks. This just might work, too.

Now investors can focus on what the global economy is doing. In the US we’re moving up the slope of our “U-shaped” recovery, as more employment begets more employment. In Europe the signs are encouraging as well. In beleaguered Spain, electricity consumption is up 5% over a year ago, a solid indicator of growth in a country with 20% unemployment.

Fears that a financial meltdown in Europe could lead to the Crash 2.0 have, for now, been stemmed by this aggressive plan. Let’s hope that this long-running Greek tragedy can have a happy ending.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-05T18:53:16+00:00 May 10th, 2010|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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