Here we are again: Back in the soup! Or in this case, the minestrone! I say that because just when the markets appeared on track to keep heading higher, Italian voters threw everyone for a loop.
Specifically, they gave a chunk of their votes to former Italian prime minister Silvio Berlusconi, a chunk of votes to an Italian comedian named Beppe Grillo, and a chunk of votes to the center-left leader Luigi Bersani.
The results leave nobody with a commanding majority in both houses of the Italian parliament. They also reflect a public revolt against the austerity policies being force-fed down their throats by Germany and other European Union members.
|Italy’s voters sent a clear message that they want nothing to do with austerity.|
So who cares?
Well, that has investors in European stock and bond markets nervous about how the European Central Bank will react. After all, the ECB only pledged to do “whatever it takes” to stabilize the debt markets in countries like Italy if those countries agreed to strict austerity policies designed to get their debts and deficits under control.
In a single day, the Dow cratered by more than 200 points. Italian banking stocks plunged by 7 percent or more, while yields on Italian bonds shot up by the biggest margin in 14 months. The VIX index of volatility here in the U.S. exploded 56 percent in a span of just four days, while the euro cratered to its lowest level of 2013.
How to Avoid Euro-Fever — and
Profit from Strength Elsewhere!
If this feels like déjà vu all over again, it should. We’ve been dealing with periodic crises in Europe for almost three years now. It’s a key reason why I have recommended staying away from a lot of the big banks that dominate the market over there.
In fact, I highlighted European banks as particularly vulnerable in my recent blockbuster report, “Winners and Losers in the Great Global Banking Crisis of 2013-2014.”
I specifically named three banks in that report whose shares were likely to fall as a result of the ongoing weakness in the European banking sector. One Spanish bank’s shares — which trade here in the U.S. — have plunged 17 percent in the past month. A German bank that also trades here has given up every penny of its 2013 gains.
What about the banks that report said you should BUY?
Well, shares of one bank that’s active in Australia and New Zealand just hit their highest level since they started trading here in the U.S. in 1995! Another stable U.S. firm is just chugging along, up a couple of bucks from its recent low.
If you’re interested in that report, with specific instructions on how to protect yourself and profit, all you have to is click here for more details. Or call my customer service staff at 1-800-291-8545 for more details on how to take action!
Other Words of Advice on Financials
Not ready to take that step? Then at least make sure you avoid ETFs like the iShares MSCI Europe Financials Sector Index Fund (EUFN).
The fund owns 101 banks, insurers, and other financial firms either based in Europe or with significant European exposure, including names like Standard Chartered PLC, Zurich Insurance Group, and BNP Paribas. I believe those stocks are vulnerable to more of these flare ups, making them too volatile for my blood.
In fact, I’m inclined to steer almost completely clear of the financial sector at this time. If you’re looking for yield, stability, and earnings growth over time, I recommend you start with the companies that stock your pantry rather than some overly complex, opaque financial firm’s balance sheet!
Until next time,