Market volatility concerns
Nov 26, 2011 / 5:00 am
Over the course of the past two weeks, clients have been concerned about market volatility. This is understandable based on what we are seeing in Europe and how the markets move up one day and down the next. However it is important not to let emotions make financial decisions and is why having a diversified portfolio is important.
However, we have seen a number of common questions and wanted to share a couple of these with you.
Q. Do you think there will be a recession globally or in emerging markets?
A. From a mid to long-term perspective it is believed that the global economic situation continues to look good for a couple reasons. First, many emerging markets have continued to grow and it isn’t expected to slow down too much over the next decade. On a percentage change this can decelerate when the GDP numbers get bigger.
The second reason is that it is still believed that the situation in Europe will be worked out. There will need to be considerable reform in European countries such as cuts in government spending and measures taken to stimulate business by lowering taxes and reducing bureaucratic red tape. It is also expected that the same could happen in the U.S. and Japan, as the developed world are learning that the one way to stimulate growth is to allow business and private enterprise to grow.
Q. What would the impact be if one or more countries withdrew from the Euro?
A. France and Germany have continuously stated their commitment to keeping the Euro. The likelihood that any other countries would consider withdrawing from the euro is very low, however if one or more did withdraw, it should not impact the viability of the Euro as a currency.
Keep in mind that the Euro is probably the most important currency change that has taken place in the last century. It has been a success, even though some economists had condemned it when it was first brought in and are again condemning it as the Euro Zone works through its financial issues. Also, having a common European currency initially brought down the borrowing costs for several countries, while making key countries’ exports more competitive by increasing the flow of intra-regional trade and resources. The reality is the Euro has now become an alternative to the US Green Back and continues to grow in use around the world.
If you would like more information on this topic or would like a review of your current financial plan, please call 778-478-9759, or e-mail [email protected]
This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, or life insurance, and should not be taken as providing, investment, financial, legal, accounting or tax advice. All services provided through NorthBay Financial Services. Mutual funds are provided through Sterling Mutuals Inc. Insurance is provided through multiple carriers. The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds and Segregated funds are not guaranteed, their values change frequently and past performance may not be repeated.
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