As Published in the Winter 2013 Edition of NJ Lifestyle
Stocks shrug off concerns and climb wall of worry in 2012 to double-digit gains
Europe —The year 2012 began much as the year 2011 ended, with much of the news revolving around the fiscal crisis in Europe. Would Greece default and leave the Eurozone? Would the Eurozone break up or kick some of the smaller financially weaker nations out? It seemed again that Europe might drag the rest of the developed world back into the recession it had just left several years before. That is, until the European Central Bank’s (ECB) President Mario Draghi announced in August that the ECB would use the roughly $500 billion Euros ($620 billion dollars) of the ECB’s lending capacity to purchase bonds of struggling countries in an attempt to keep yields from rising sharply on these cash strapped countries. It was a brilliant move for two reasons. First, the ECB did not have enough money to bail out all of the countries in need, but by preventing escalating borrowing costs for these countries, he bought them the much-needed time to get their fiscal houses in order. Secondly, it restored confidence in Europe, at least for the time being. In financial markets, as we saw in 2008, confidence, or lack of confidence, can mean life or death.