Markets Take Drubbing As European Headline Risk May 2012 Increases:
U.S. equities markets tanked today as investors re-evaluated the economic situation in Europe with Greece and Spain leaving the European Union becoming a stronger possibility. Major sectors such as tech, financials, and energy fell below key technical price levels as traders rushed to get out of long positions in anticipation of more bad news coming out of the EU.
In the current environment, U.S. equities look cheap but could remain bargains until “safe haven” trades are abandoned and more investment capital from Europe hits the shores. The key question is “where to invest now”? Gold? Bonds? BRIC? PIIGSs? Asia? None of these choice look attractive in the medium run compared to sectors in the U.S. that are poised for growth.
Global money flows will be important to monitor in the next few weeks which would be a boon to under performing U.S. sectors. European risk will not abate anytime soon so it may be useful to have cash ready while watching for sideways action with some buying on dips when appropriate.
Economic fundamentals also look weak along with soft technical patterns and increased Europe stress syndrome which could make market moves choppy for in the short run.