by Chris Puplava Watch the TED Spread
Portfolio Manager, Fundamental Analyst at PFS Group
Like the Ted spread for the US, the euro equivalent also shows counter-party risk continues to rise in Europe as the spread is higher now than at any time except for the peak in the 2008 credit crisis. What is key to note is how quickly the credit spread jumped in 2008, rising from less than 1% to nearly 4% in a matter of days....
Summary
It is my view that unless the ECB prints near the magnitude of trillions to support the European sovereign debt market and banks, then things are likely to get worse than better. Additionally, despite a US economic recovery, the message of my technical monitor and the general message from the credit markets suggests the US stock market is on shaky ground. If the ECB was going to come out with a massive quantitative easing program then spreads would contract and Europe would not pose the same threat to the current US economy as the US did to Europe and the world in 2008. Until that happens, defense and capital preservation remain paramount to investing.
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