Today's surge in stock prices around the world was attributed to comments by the chairman of the European Central Bank, Mario Draghi, who stated that the ECB would do "whatever it takes" to hold the Euro zone together. Such confidence in the wisdom and power of the central bank and its head. It almost made me feel nostalgic for Alan Greenspan, the original "Maestro" (not really).
Expectations of a more active policy of intervention in markets by the ECB was a tonic for beleaguered investors, who have endured month after month of the European debt crisis with measures that have thus far been insufficient. It could be that this time the European authorities really mean business. I'm skeptical. But even if they do, I think the problems there present risks to the entire financial system, along with other issues, such as the likelihood of earnings shortfalls in coming quarters.
I do think that European equities are quite inexpensive on a longer-term basis, but I am cautious on global stock markets at current levels and will generally watch from the sidelines for the time being.
S & P 500: 1363