Time To Get Defensive

by on June 15, 2011

This week continued the rampant pessimism on Wall Street as some doom and gloom from Europe all but erased the memory of a solid Tuesday session from investors’ minds. While the S&P 500 is just down fractionally on the week– just over 0.4%– the outlook for the rest of the week is quite poor thanks to a quickly deterioration situation in Greece. The country’s market is in shambles as yields on short term debt are spiking well past the 20% level, a general strike looms, and the Prime Minister has offered to resign if a new government would pledge to keep austerity measures intact. “Greece could have a contagion effect,” ECB Vice President Vitor Constancio said at a briefing in Frankfurt today, when presenting the bank’s semi-annual Financial Stability Review. “That’s the reason why we are against any sort of default with haircuts and any form of private-sector event that could lead to a credit event or a rating event.”

Against this backdrop, the euro lost more than 2.7 cents against the greenback in Wednesday trading and even more traders ran for U.S. Treasurys as a safe haven from the storm. T-Bills are now yielding less than 3.0% for the Ten-Year and below 40 basis points on two year debt.

With these developments taking shape, some our ETF plays from Monday have held up quite well despite the broad market weakness. Moreover, we’re taking an opportunity to shift exposure in our all-ETF portfolio given recent events:

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