The economic news out of Europe has not improved with the UBS rogue trader scandal. According to information gathered from The New York Times, the Swiss bank lost $2 billion from proprietary trading within its investment division. Add this to the crises in Greece and Spain and the declining Euro and its clear that investing in Europe will have significant risks.
According to a Salon report, emerging economic powerhouses like Russia, China, Brazil, India and South Africa are looking to invest in struggling European markets to relieve them from stress due to its debt crisis. However, their propensity to save this market is underscored by their relative incapability to shoulder the entirety of the problem.
Investing in these emerging markets may prove more beneficial in short-term investing. But as for getting into Europe for the long haul, while cheap will depend on the European Union sorting out its currency issues and the rebound of the US Dollar.
The Euro currency market’s outlook, according to analysts from The Street.com, is not expected to improve. The Euro has declined in value but it still remains strong against the dollar. The US domestic market will need a rebound in production and an expansionary monetary policy by the Federal Reserve for it to strengthen itself. Using dollars to buy the Euro is not recommended as the dollar continues its decline.
American investors who have weathered the down market of the past decade should do well to hold fast before diving back into Europe. Domestic investing now requires more of a real-time effort in managing portfolio fluctuations, but can promise a better return.
As long as the US and European markets suffer from their own debt crises and rogue traders wipe out billions in a day, it remains to be seen whether this bear market will get a regulatory push from governments. The instability in the proprietary markets has not resisted bombshell implosions like Lehman Brothers, A.I.G. and, possibly now, UBS and is still feeling its effects. Staying away or looking to emerging markets might be the best option for now.