A year ago, this would have been a high tension weekend. Since then, the world has had a chance to prepare for the worst. I have never seen so much cooperation among central banks around the world, to get in front of a problem and announce they will provide all the liquidity needed.
That is one reason the market has been up nicely this week. Another reason is the increasing awareness that Europe is finally trying to get ahead of the problem. There is hope that next week’s G-20 meeting in Mexico will produce commitments from around the world to help Germany bailout southern Europe. The following week, we will see another European summit, and there is increasing hope of meaningful progress this time.
Despite the rising optimism, this is not a time for investment bravery. The stock market is normally whip-sawed by corporate earnings and economic reports, making it somewhat predictable. Today, the stock market is badly whip-sawed by political headlines, which are far too unpredictable. Remember: It is better to miss some of the upside than to catch most of the downside.
So, enjoy this balmy summer weekend. You’ve survived high tension weekends before, and this is not!