Ready, Willing, And Stable

The ECB needs to keep the EU stable

Image source: MNStudio, Alexandros Michailidis - Shutterstock

What's going on?

Data out on Friday showed the eurozone economy grew by more than expected in the third quarter – and investors are expecting the European Central Bank (ECB) to do all it can to keep things steady.

What does this mean?

Europeans didn’t have quite as many social restrictions to worry about over the summer, which goes some way to explain why Europe’s economy rebounded last quarter. But now that two of its biggest contributors – France and Germany – are back in lockdown and circling the second-recession drain, there are more and more doubts it’ll be able to keep growing. Even the ECB seems to have them: the central bank hinted on Thursday that it might need to pump even more money into the region in December – by buying bonds and lowering interest rates – to stimulate economic growth.

Why should I care?

Zooming out: No checks, no balances.
The US reported pleasantly surprising economic growth late last week too, but it still has plenty of challenges ahead. For one thing, rising coronavirus cases are threatening to put the economy on pause again, just like they have done in Europe. And for another, the US government’s stopped writing the checks that have been juicing consumer spending, and no one knows when – or even if – they’re coming back again.

For you personally: Extreme investing.
With grim economic expectations threatening financial markets all over again, your best laid portfolio plans could end up going awry. That’s why some strategists think you should protect your investments using the “barbell strategy”. That’s where you go for two opposite ends of the investing spectrum at the same time, and avoid the middle ground altogether. You might want to, say, go for cheap, beaten-up stocks like energy and finance on the one end, and expensive, high-growth sectors like tech on the other.

Originally posted as part of the Finimize daily email.

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