The implication from eurozone contagion?
Crisis management by the authorities in the eurozone has thus far been integral in supporting financial markets and investor sentiment. But the situation has really not gotten any better. And the authorities may be losing credibility and capability.
Translation: there remains a significant chance that sovereign default contagion sweeps across the eurozone banking system and into the US. Losses from a periphery default may not alone be enough to upend the US banking system, but a widespread panic among investors may exacerbate the situation and further undermine risk appetite in a vicious circle.
No new recommendations or adjustments. Please see the PDF for details on our recently added positions in SGG and DTO.