Last week proved to be another volatile and emotionally driven one, as stocks continued to show signs of increased volatility. The latest worry was the country of Italy and its possibility of defaulting on its debt. The story in Italy is basically the same as the story in Greece, except that it’s much larger which means that it’s potentially far worse. Italy is the third-largest economy in Europe and it now holds some $2.6 trillion in debt. That’s more than Greece, Ireland, Spain and Portugal combined. It that figure ever did default, investors would certainly take notice.
Stocks Move Higher
Worries that the U.S. economy may be slipping back into another recession along with continued fears of a possible Greek default, saw the U.S. equity markets experience their worst weekly decline since the fall of 2008. (Although the S&P 500 market have been this low in August already two times) Global investors dumped everything from stocks to corporate bonds to foreign currencies and fled to the safety of U.S. Treasury’s. The Dow, which had plunged over 674 points on Wednesday and Thursday of last week, suffered the sixth largest weekly point drop in its 115-year history.
Just when you thought the equity world was about to fall apart, markets were greeted with five consecutive days of upswings during the second full week of trading in September. Worries that several countries in the European Central Bank region would default on their debt had caused stocks to begin the month with one of its worse performances on record. However, news that five of the world’s central banks would provide for some much-needed liquidity has for now dissipated the majority of the ‘bears’ for now.