Investors shoring up portfolios in Europe debt crisis
by Daniel Wagner, Associated Press
June 11, 2012 01:13 AM | 450 views | 8 8 recommendations | email to a friend | print
WASHINGTON — Europe, a thundercloud over financial markets for three years, might burst this month into a downpour. For investors who want to stay dry, some shelters look sturdier than others.

Junk bonds, companies that make consumer products and even some European stocks could add a healthy shot of profit to well-designed portfolios, analysts and traders say.

For the third straight spring, fear about Europe’s debt crisis has rattled U.S. stocks. Investors are increasingly worried that Greece will exit the euro, and Spain might need an international bailout.

The next date to watch is June 17, when Greece holds an election. If the far-left party wins, Greece may spurn the program of bailouts and steep budget cuts that has kept it afloat.

Global markets would most likely whip and dive if that happens. But if the worst fears don’t materialize, global markets might see a short-term “relief rally.”

The trouble is that nobody knows how the European crisis will unfold. So investors need diverse portfolios that won’t crumble if things get ugly — or miss the updraft if Europe simmers down.

David Kelly, chief global strategist at JPMorgan Funds, says it makes sense to tilt your portfolio slightly toward investments valued in U.S. dollars — stocks and bonds issued by U.S. companies — because U.S. markets are likely to remain more stable.

In uncertain times, a company’s products matter. The more necessary the product, the better its producer can weather a typical economic downturn, says Jerry Webman, chief economist at OppenheimerFunds, an asset management firm.

“People are still going to brush their teeth, even if the economy gets into difficulty,” Webman says. He likes companies that make boring yet necessary products like food, dustpans and dental floss.

The exception: any company that depends on exports to Europe for a big chunk of its revenue. Analysts say investors should review companies’ financial statements to find out which rely heavily on European consumers. Those are the people who would cut back on spending if the crisis deteriorated.
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