Euro Crushed US Stocks
We’re back at it. Panic has hit the street and the US becomes the logical place to hide. This forces the euro lower and causes many stocks to suffer because of heavy focus outside the US. Multinationals like GE and 3M are hurt as well as euro based companies like Vestas.
But this doesn’t really make any sense long term. As a whole the EU is in better financial position than the US. There are pockets of trouble and there will be pain to fix them but I am more worried about US deficits and China collapsing than a tiny place like Greece.
So what’s going to fix this? Trading happens so fast these days that huge positions can be put on and taken off in the blink of an eye. There are big time traders that are short the euro right now and when the euro strengthens or the stock market starts rising they will have to cover their short positions and drive both the currency and stocks higher. It’s a classic momentum trade.
I’m not too concerned about the long term but it’s bound to be a bumpy ride for the next few months.