European Summit Ends With A BANG Prior To The 4th Of July
No one had any great expectations for the European Summit last week, but when you set the bar on the ground, it’s not hard to clear it by a lot.
That’s what happened when the European Union lowered expectations, then surprised everyone by forging ahead with the following framework:
- The European Stability Mechanism (ESM) rescue fund will buy Italian and Spanish debt to stabilize yields;
- The ESM can now loan directly to faltering banks, eliminating the problems of lending to governments (and increasing their debt load);
- Speed up plans to create a single euro-zone bank supervisor;
- Embark on modest stimulus spending.
This framework is still not enough…but it’s a good start. There is always the chance of discovering or anticipating problems once analysts really dig into the details.
We will see how long the enthusiasm lasts. The goal is to instill confidence and give leaders some breathing room as they hammer out a more permanent fix. Remember, this is not a long-term fix; Italy, Spain and Greece still face real troubles. It is, however, a framework no one was predicting would come out of the meeting.
Here’s how the market ended up for the week. NOTE: we will have a 2nd Quarter review in our newsletter that will be published separately.
The Affordable Care Act (the name used for messaging by the administration and Democrats) – otherwise known as “Obamacare” (the name used for messaging by Mitt Romney and the Republicans) was upheld by the Supreme Court last week in a 5-4 vote, but it’s unclear how many states will participate.
We are not expecting a whole lot from the upcoming labor report due out Friday. The unemployment rate is forecast to hold at 8.2%. Employers are expected to have added 90,000 net new jobs in June. We’ll see if that forecast is accurate or not. Last month the forecast was way off. Also, +90k jobs is not that impressive, but it would be a pick-up from May’s 69,000 rise.
The problem with the slump in job growth is that it has shaken confidence and hampered consumer spending. This makes the economy more susceptible to any fallout from Europe. But the good news, as can be seen below, is that the softening in Consumer Confidence taking place right now has yet to even come close to the levels seen in the previous two soft patches.
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David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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