Monday, November 30th, 2015

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Investing During Downturn Depends on Trust in Europe

Jean-Claude Trichet believes European leaders will decide the direction of the economy.Investing during in the current economic environment depends a good deal on factors that are beyond investors’ control, according to The Economist.

Traditionally, investors have turned toward more stable markets like sovereign debt or precious metals during economic crises, or potentially withdrawn from the market entirely.

The Economist notes, however, that the interest rates for standard savings accounts have fallen as low as 1.5 percent in many places, well below the level of inflation, around 3.8 percent in the U.S. Government bonds meanwhile have fallen to only 2.5 percent in many places and record-high commodity prices make that a difficult market to trust.

Ultimately, the news source argues the situation depends largely on the outcome of the ongoing European debt crisis, with a default favoring the comparatively stable U.S. Treasuries. The better course of action from both a market and an individual perspective would be to invest in stocks at their current low prices, but the news source notes this course heavily relies on trusting European governments not to bungle the debt negotiations and allow a default, of which not all investors are certain.

Outgoing European Central Bank president Jean-Claude Trichet echoed these sentiments in an interview with Bloomberg, suggesting the economy was largely depending on the wise choices of European policymakers.

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