A False Sense of Security?

Europe made progress this past week, but pullbacks are still possible

Bearemy Glaser 10 September, 2012 | 12:04PM

Stocks around the world were rallying this past week and the markets seemed to be cheering progress in Europe and mostly shrugging off disappointing US jobs data.

The cheers were not totally unfounded. Europe did make a substantive step forward this week, and the jobs data--although disappointing--was hardly a disaster. But the world economy is far from out of the woods, and given how much stocks have run up, and how full valuations have become, investors must continue to exercise caution and should be prepared for a potential pullback.

Europe Ends Its Vacation

Europe made a real effort to bring its debt crisis under control this past week. After promising to act last month, we finally got the concrete details of the European Central Bank's (ECB) plans to keep short-term borrowing rates reasonable for some beleaguered eurozone members. And the details mostly lived up to expectations. Unlike previous plans that seemed to be filled with hidden landmines, the new outright monetary transaction plan looks like it can achieve its goals. The rub is that the goals of this plan are modest compared with the size of the eurozone crisis.

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About Author

Bearemy Glaser

Bearemy Glaser  is the worry-prone alter-ego of Morningstar markets editor Jeremy Glaser. Each week, Bearemy shares what's topping his list of concerns.

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