Europe is again back on investors’ radars as market volatility heats up after several big headlines came in over the weekend. I’m not going to sugarcoat any of these headlines. But I will say that our stocks are largely insulated from these events and that the news could move investors out of trouble areas and into our stocks as they trade up their stocks. Let’s take a look at some of the biggest news events.
The first was from France, as leftist presidential candidate Francois Hollande scored a narrow victory over incumbent Nicolas Sarkozy in the first round of voting.
It is widely expected that Francois Hollande will become the next President of France and that income taxes will be increased up to 75% to pay for the country’s growing deficits caused by generous social programs. It will be fascinating to see how France’s escalating tax burden and more generous social programs will impact its economy.
The other big news was that the government in the Netherlands was close to collapse on Monday after failing to agree on budget cuts.
The Dutch prime minister and his cabinet tendered their resignation to the nation’s Queen, paving the way for early elections. The country has been a strong supporter of austerity since Greece’s debt problems initiated the eurozone’s debt crisis more than two years ago, but the Dutch economy has recently become one of the worst-performing in the eurozone.
As a result of the continued mess across the pond, major European indexes were down about 3% on Monday while U.S. markets finished the day a little less than 1% lower.
As I mentioned, none of this is good news, but it is fairly localized. Investors will initially sell good stocks and bad on the news, but as they come back into the market they are going to trade up to higher-growth stocks that can provide the strong gains they need going into the summer.