Trading US Stocks versus Euro Zone Stocks

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Trading US Stocks versus Euro Zone Stocks

What are the differences in trading US stocks versus Euro Zone stocks these days? Data from the Chicago Board Options Exchange indicate that standard options trading has dropped off a bit. Traders note that a more stable US stock market, namely a less volatile market, is the cause. US manufacturing is picking up and US employment figures have been improving month by month for nearly a year. On the other hand the debt dilemma does not seem to want to leave the Euro Zone alone. Euro Zone bailout package consequences don't seem to be over. The several members of the EU agreed recently to increase the size of their bailout fund, again. Unemployment is close to 25% in Spain and people have taken to the streets in a general strike to protest austerity measures. The question for Europe seems to be two fold, can they avoid debt default by their members and will the debt relief medicine of austerity measures lead to a recession and more debt problems on the continent? Trading US stocks versus Euro Zone stocks may have a lot to do with on whether the trader prefers to go long or short.

Will the Bernanke Doctrine applied to the Euro Zone save the day? A recognized expert about the Great Depression is the current Federal Reserve Chairman Ben Bernanke. Mr. Bernanke's prescription for the recession has been loosely referred to as the Bernanke Doctrine. Basically the point is that a bad recession was turned into a depression in the early 1930's by restrictive monetary policy and a trade war started by the USA. The response to the current crisis has included money for banks to maintain credit and the purchase of Treasury bills which serves to drive interest rates lower. Much of this policy is carried out with printed money. The end result will likely be a US economic recovery and the devaluation of debt held in dollars by many foreign nations. A feature of US stock trading strategy is that this solution will make the dollar weaker versus commodities and any currency that is not subject to the same policy. How this relates to trading US stocks versus Euro Zone stocks is this. It turns out that the current president of the European Central Bank went to the same school as Bernanke for his graduate work and has adopted many of the same policies.

To the extent that the US prospers and Europe falters, how will that affect trading US stocks versus Euro Zone stocks? A weaker dollar, occasioned by US monetary policy will make US exports more attractive and exporters more profitable. The austerity measures taken on by European nations may simply drive them back to recession. However, one does not need to trade all European stocks. One only needs to find stocks in the Euro Zone that benefit from a weakening Euro, stocks of companies that sell to a broader market, or high tech companies with unique products. As currencies weaken the price of energy will become a major factor for struggling companies. Considering that Euro Zone does not produce a lot of oil this will affect trading US stocks versus Euro Zone stocks. It may be good news for trading US oil stocks , however.

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