| NEW YORK, April 24
NEW YORK, April 24 Once again, concerns
about Europe's debt problems are weighing on global stock
The latest catalyst was a triple decker: the apparent
collapse of the Dutch government; a victory by Socialist
candidate Francois Hollande in the first round of the French
presidential elections; and an unexpected drop in euro zone
business in April, according to the Markit purchasing manager's
The European FTSEurofirst 300 index, a broad measure of
European stock markets, fell 2.3 percent on Monday to its lowest
level since mid-January, though it managed to recoup some losses
The sell-off may be overblown, analysts said. Financial
institutions are much healthier now than a year ago due to steps
taken by the European Central Bank, which analysts said should
lessen the chances of Europe's debt problems bleeding into the
global economy. As a result, German companies, global
dividend-paying stocks and emerging market debt may be smart
Here are suggestions on how to play the latest
BETTING ON GERMANY
The recent stock pullback may be an opportunity to pick up
shares at more favorable prices, analysts said.
"The concern that we had last year was of an implosion of
the euro-area financial system that would take everything else
down with it, and that scenario is unlikely to recur this year."
said Michael Hood, a market strategist at JP Morgan Asset
Management. "The downside risks are almost bound to be less"
because of the actions taken by the European Central Bank to
stabilize the financial system, he added.
Hood remains relatively optimistic about the direction of
the global economy. The U.S. labor and housing markets are
gradually healing, he said, and the pace of growth in China
should pick up in the second half of the year after having
slowed to an 8.1 percent rate. Economists expect China's economy
to grow by 8.4 percent over the rest of the year, according to a
In the United States, he forecasts that the materials and
the financials sectors will continue to gain through the end of
the year. The financials sector of the S&P 500 is up 16 percent
this year, the most of any sector, while the materials sector is
up 7.7 percent.
In Europe, performance will continue to depend more on
geography than sectors, he said.
"Germany has outperformed Europe in general by about 10
percentage points this year, and I think there's further room
there," he said.
The iShares MSCI Germany Index (EWG) is one option
for a play on German companies. The $2.9 billion fund charges 51
cents per $100 invested and yields 2.9 percent. Its top three
holdings are Siemens AG, Basf SE and SAP
The fund is up 21 percent over the year to date, making it
the top-performing fund in its category, according to
Morningstar data. The broad European Stoxx 50 index, by
comparison, was down 3.1 percent for the year through Monday's
BUYING ON DIPS
Other money managers are turning toward defensive stocks and
emerging market bonds as a substitute for moving into cash.
Glenn Guard, the director of investment management at
Campbell Wealth Management in Alexandria, Virginia, said his
company is avoiding investing any new money in European indexes
because he thinks the sell-off will continue. Instead, he is
looking at global businesses that have a record of increasing
their dividends such as Coca-Cola Co. and Procter &
"Though it doesn't feel like it, the world economy is
growing and these companies are going to participate in that
growth," he said.
With a year-to-date gain of 5.3 percent through Monday,
Coca-Cola stock has slightly underperformed the 8.7 percent gain
in the broad Standard & Poor's 500 index. That may change,
however, if the stock market's rally stalls and investors turn
their attention to blue chips. Coca-Cola comes with a dividend
yield of 2.8 percent and trades at a price-to-earnings ratio of
Mark Lamkin, the head of Louisville, Kentucky-based Lamkin
Wealth Management, expects concerns about Europe will lead to a
10 percent drop in the S&P 500 index. He is waiting for a
further decline before adding to his positions in global
industrial firms through the Industrial Select Sector SPDR
Industrial Select, a $3 billion fund that charges 18 cents
per $100 invested, focuses on companies in industries like
aerospace, defense, transportation and industrial conglomerates.
Its largest holdings are General Electric, United Parcel
Service and United Technologies Corp. The fund
is up 11.4 percent since the start of the year, according to
Morningstar, and comes with a dividend yield of 2 percent.
"We're in the middle of a business expansion, and we're
looking at companies like 3M that are gathering momentum that
have global reach and sell more to businesses than consumers,"
Other money managers are turning to the bond market. Frank
Fantozzi, president of Cleveland, Ohio-based Planned Financial
Services, said many of his clients are moving toward emerging
market and high-yielding corporate debt.
"If we get a bad employment numbers and you add that to
Europe, then (stock market) volatility could spike," he said.
One popular ETF choice: the iShares JPMorgan USD Emerging
Markets Bond (EMB), an ETF that holds only
U.S.-dollar-denominated bonds in order to eliminate currency
risks. The fund, which costs 60 cents per $100 invested, yields
4.7 percent. It is up 4.2 percent for the year, according to