Beware of the P.I.I.G.S.
If you have been wondering what specifically has been one of the main culprits in the stock market devaluation in recent days, look no further than to a group of countries in Europe affectionately known as the P.I.I.G.S. The countries, which many believe are the weaker components of the Euro-zone, include Portugal, Ireland, Italy, Greece and Spain.
There has been mounting concern that these countries will continue to struggle to control their own budget deficits. Such a struggle could lead to rating downgrades or even, in the most extreme case, defaults on interest payments related to the sovereign debt that each of these countries have outstanding. Such a credit action could send shivers through the global capital markets especially at a time when frozen credit markets are just beginning to thaw.
Based on the information available to us, we, at Hennion & Walsh, do not believe that this negative domino effect will come to fruition but do believe and understand the concern that many investors have when the topic of a potential sovereign default arises.