Finding Investment Opportunities in Europe

As the Europe continues to battle the debt crisis, there is little indication that we could have a resolution by the end of this year. In fact, some analysts and other big players are giving the Eurozone a deadline in September that will mark a new period of “default watch”. The idea being that if this crisis is not at least close to being contained by the time we get to that deadline in September, countries could begin to be on watch for defaults.

Whether this is simply speculation or truth, one thing for certain is you do not want any exposure to the Eurozone as of right now. However, if you sift through the rubble, you will find that the Nordic countries are indeed strong and returning nice figures.

According to Global X analyst Alex Ashby, “The Nordic region provides Europe exposure so investors can play a rebound there with countries on the periphery” (Benzinga). Essentially, you want to be playing countries such as Norway, Sweden, Denmark and Finland.

In the Global X FTSE Norway 30 ETF (NORW), state-ran Statoil (STO) and SeaDrill (SDRL) account for over 29% of the fund’s weight. This can be an issue if oil goes down because the fund is heavily in oil and oil services companies. However, that has not stopped the massive inflows from the mainland Europe to the Nordic region.

A more balance, more diversified way to play the Nordic region is through the Global X FTSE Nordic Region ETF (GXF). Rather than just playing Norway, you will now have a piece from every country in the region, to add to diversification and security. However, if oil is in an uptrend, NORW may be the better way to play the region because the ETF will be able to yield in more gains through higher oil.

Meanwhile, ETFs such as Vanguard MSCI Europe ETF (VGK) has rebounded from its lower levels but continues to be a disappointment. At any rate, VGK may be a good short candidate as we go forward. The lack of progress is starting to worry investors which could create a very dark, bearish September and October.

While we certainly do not face the end of the world, there are certainly a few events on the horizon that point to the possibility of stock markets breaking down and correcting. In fact, after today’s price action in the markets, the correction may have already begun. Whether it is a small correction or the big one that everyone has feared, it is recommended that you lock in your gains and move to the sidelines.

The bottom line here is the market has been running up for awhile and it is time that it took a breather. That being said, if Europe does not get it together soon, we could be facing much steeper declines. One thing is for sure, the Nordic region will continue to outperform the mainland Europe and that is why you want to be in NORW or GXF.

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