June 5, 2012
The Group of Seven finance ministers and central bank chiefs discussed recent developments in the eurozone today and vowed to respond "speedily" to the debt crisis, though there was no official statement following the discussion.
Representatives from the seven top developed nations—Canada, France, Germany, Italy, Japan, the U.K., and the U.S.—discussed progress towards a financial and fiscal union in Europe.
However, although the G7 talks boosted the euro earlier in the day, it fell again after Spain highlighted that it was facing funding problems as the government there has effectively lost access to capital markets because of steep risk premiums demanded by sovereign bond investors. Investors worried that the country—the fourth-largest in the eurozone—may have to seek external aid, much like Greece is now.
In addition, the meeting has bolstered speculation that the European Central Bank could opt for some form of further monetary stimulus when it meets on Wednesday—such as a rate cut. Supporting this possibility, the Reserve Bank of Australia cut interest rates earlier today.
Here in the U.S., investors will be closely watching Federal Reserve Chairman Ben Bernanke on Thursday for any hints on the possibility of more quantitative easing. Personally, I think that the Fed will rest easy for a while and take a bit more of a hands-off approach—not goosing the markets through QE3 but also not raising interest rates anytime soon.
As a result, I expect Treasuries, savings accounts and CDs are going to remain at record lows. This is bad for savers who don't trust the market and are cringing at the 0.25% interest rate in their bank accounts, but it's great for investors—the best stocks right now are those with high dividend yields, an aggressive stock buyback program and strong sales and earnings.
Right now, my Blue Chip Growth Buy List—particularly our conservative stocks—are a great place to initiate a position for the summer volatility. These stocks are the most stable in these types of market conditions, and many offer great dividends too. So you get the biggest bang for your buck.