Member FINRA/SIPCPage 1 of 4
Jeffrey Kleintop, CFA
Chief Market StrategistLPL Financial
LPL FINANCIAL RESEARCH
Weekly Market Commentary
January 22, 2013
Same Europe, Different Crisis
This week’s European ﬁnance ministers’meeting is a reminder that each spring for thepast three years, U.S. stocks have started aslide of about 10% during the second quarter,led by events in Europe.In 2012, the European fear gauge was therise in southern European bond yields asthe ﬁnancial crisis worsened. In 2013, it isnorthern European bond yields falling as theeconomic crisis worsens.
While fourth quarter 2012 earnings results will again garner attention thisweek, investors may also be looking overseas to gauge market direction,since this week holds the ﬁrst meeting of the year for European ﬁnanceministers. It is worth remembering that each spring for the past three years,the S&P 500 has started a slide of about 10% during the second quarter,led by events in Europe.
S&P 500 Index Percent Change2012201120102013
Stocks’ Spring Slides
Source: Bloomberg, LPL Financial 01/22/13The S&P 500 Index is an unmanaged index, which cannot be invested into directly. Past performance is noguarantee of future results.
However, this year may be different. In 2012, the European Union ﬁnallytook two important steps to halt the ﬁnancial aspect of its ongoing crisis.
One of those steps was the creation of the European Stability Mechanism(ESM), a permanent rescue fund for countries in need of credit and unableto borrow in the market.
Another important measure was the authorization of Outright MonetaryTransactions (OMT), granting the European Central Bank (ECB) morepower to intervene in the bond markets to assist countries in distress.With these programs able to lend with few limits to banks and willing tobuy bonds of any country that will accept the conditions, we do not expectmarket participants to fear a European ﬁnancial crisis this spring and drive a
Europe has traded a ﬁnancial crisis foran economic one.