It appears that the European Union is on the verge of collapse, or least the investors believe it is, and therefore they will seek other places to put their money. As much as you’d be led to believe, China is not in that good of shape either, and as the EU’s economy falters, there will be fewer buyers and purchases of goods made in China, meaning China cannot maintain its growth rate, and therefore there will also be a flight to safety out of China.
The Japanese economy is still trying to recover from the earthquake, and they have debt issues with their huge stimulus they put forth, plus what they already had. There are very few nations which are a safe bet (Canada, Australia, etc), any time markets get shaken up around the world, there is an immediate flight to safety here the United States. Right now, the United States is at 2.5% growth rate, however, we will be at zero growth rate due to the fact that the EU will not be buying many products or services from us during their economic collapse.
Nevertheless, zero interest rates on our treasuries, and zero growth rate are not so bad considering many of our corporations are making a profit, are flush with cash, and are paying out dividends and a fair yield on their corporate bonds. Therefore, we could expect those companies that don’t have a large exposure to Europe see money flying in for their new issues of corporate bonds. We will also see lots of money flying into the US stock market.
It appears that the fall of Europe may hurt many US banks because they are global and much of the money is intermingled. However, we can withstand that and our banks may end up taking a haircut, but our economy is doing good, and it is fundamentally sound. This means we could see a very nice surge in the US stock market between now and the end of the year in 2012.
Thus, this might be a very good time to be in the market, rather than out of the market, as global money flies to safety, and it always does when there are problems around the world in other nations. If we look at the major economies such as the EU, Japan, China, and the US we see that the United States is the safest that. China is having a wage inflation problem, and the corruption in their previous banking deals has proven almost impossible to hide.
China will also take a huge hit in their manufacturing sector without the EU ordering their goods therefore job losses causing civil unrest, making it not a safe bet to park assets. It’s time to invest in the United States because it is the only transparent and viable place that can withstand the onslaught of global economic turbulence. Indeed I hope you will please consider all this and think on it.