Greece Departure Causes Further Concern; U.S. Plans Additional Steps
During the November 2 G-20 meeting in Cannes, it was clear the eurozone leaders will not accept Greece's departure from last week’s EU sovereign debt agreement (expressing this view was Luxembourg PM Jean-Claude Junck). Greece's PM Papandreou meanwhile restated plans to allow his country's January 2012 vote on Europe’s rescue package. At risk -- should the EU package acceptance vote by Greece fail -- is the country's (a) membership in the EU, (b) access to EU and Central Bank loans, and (c) continuance of current government leadership (see additional comments at November 1). So, the G-20 meeting officially begins November 3, in search of broad EU financial participation. Related, the cost of insuring European debt fell on November 2 as investors premised that Greece is headed for default.
In the U.S., on November 2 Federal Reserve Chmn. Bernanke cited (a) possible additional steps to ease monetary policy (commentators and economists speculate a January 2012 announcement), and (b) the “...significant downside risks to the 2012 growth forecasts,” and (c) purchases of mortgage-backed securities as a “viable option” to help the economy.
Despite the above, businesses are conducting business. The positive U.S. 2011 Q3 earnings continue -- Pulte Group Inc. rose 4.4 percent (a U.S. homebuilder) while Bank of America, Alcoa, and Chevron rose more than 2%. The S&P 500 Financials Index increased almost 3% percent.
Our view of learnings from the last two days: Investors with a long view should ignore the volatility of the recent global trading sessions and retain the course depicted in their investment policy statement.