As the global economic recovery continues, we have witnessed dramatic global stock market volatility recently, and the sovereign debt crisis in parts of Europe continues to make headlines. European equities were lower again in July due to concerns over global growth, the debt limit in the United States, and fears that the sovereign debt crisis is expanding to Spain and Italy. This volatility continues, despite recent decisions by policy makers, announced at the end of July, that provide encouraging signs they will take any actions necessary to resolve the financial situation.
Whatever the solution, it’s clear that steps must be taken quickly to prevent stifling economic growth. The International Monetary Fund, in a recent report on eurozone conditions, warned that Europe’s debt crisis must be quickly addressed by policy makers. “Failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers.”1 The recent actions of policy makers clearly support their intent to avoid the fallout from further crises.
We continue to look for signals from policy makers to see whether they can control inflation and encourage economic growth. Our portfolio managers continue to monitor sovereign debt activity, seeking out opportunities to add value. We encourage our investors to continue to maintain a well-structured long-term strategy and rebalance when necessary.