Courtesy of Walter Gault, Communications Editor, Sabrient
Editor’s note: Walt Gault is the guest author this week. David Brown will be back next week.
Last week was bullish overall (see Market Stats below), albeit on low volume, with economic reports slightly positive as a whole. The latest Dallas Fed Manufacturing Survey indicated that manufacturing is slowing in terms of growth but not declining. It was topped with a very good Consumer Sentiment number on Friday that not only beat consensus estimates but also hit its strongest point so far in the recovery phase. Today’s Consumer Confidence was less than expected, coming in at 64.9, nearly 5 points below the consensus estimate. While the consumer reports appear to be conflicting, I’m interpreting them as follows: Consumers are comfortable with the way the economy is progressing and they aren’t rattled by the Euro fiasco (sentiment); but looking forward, they are unsure of what lies ahead (confidence).
The Eurozone outlook is a bit better, although the Euro itself was off. Hopes for a Greek resolution are more optimistic, at least this week. It seems that Germany’s tough, austere attitude towards its European neighbors has no bite behind it. They are so tied through imports and exports that Germany’s economy would likely slump if it does not go along with the bailout.
One of Sabrient’s senior analysts, Daniel Sckolnik, sees signs of an orderly Greek default. He says if investors are able to step back from all the “noise” that is generated from out of the Eurozone on a near-daily basis, they may be able to gain an objective perspective as to what is actually occurring there. Greece is one of the smaller economies, of course, but it is the most likely member-country to default on its debt, particularly as its own credit ratings are deep into the “junk bond” territory. It will hold June elections, and the chances of yet another anti-austerity leader emerging is at the least a coin toss away from occurring. The fact remains that this is not all occurring all at once, which means that the markets are reactive, but not to extremes. But, as current leaders in the Eurozone are now speaking publicly about preparations for a Greek exit, you can rest assured they have already executed whatever safeguards they are able to in order to avoid a disorderly Greek default. Objectively speaking, what is occurring now…
