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Beware of Europe’s Top New Export: Fear


With two of Europe's biggest economies (UK and Spain) sliding back into recession in the past two days, there's a growing concern that the region's economic problems will spread far beyond its own borders. Add in the fact that there's an uptick in nationalist rhetoric from places like France and the Netherlands (as well as the likelihood that street protests will resume as we hit May Day next week), and the European saga demands our attention and respect all over again.

As much as we can count on our economic leader (Bernanke, not Obama) to take action sooner rather than later, data points, like durable goods, had their sharpest drop in 3 years, making the waiting that much more uncomfortable.

"So much of economics is sentiment," says Jeff Macke, in the attached video. "People just don't spend when they feel bad."

And neither do companies, I might add, a response that may have already started to materialize, given the shocking drop in durable goods.

The tricky question is, when does all of this become too big to ignore? And if we do, indeed, start paying closer attention to Europe's descent, how much of an impact will it have on the global economy, as well as our own and China's?

So far, stocks in the U.S. and Europe appear to be immune to such worries and are galloping higher on the heels of strong results from Apple (AAPL) and Boeing (BA). In reality, a sizable portion of the pop is predicated on the belief that bad economic news will garner more prompt service from the Stimulator in Chief, Ben Bernanke.

Yet amidst this relative domestic bliss and short-term appetite for stocks and risk-taking, the fact cannot be ignored that the S&P 500 is on track to post its first losing month of the year—it's biggest dip since September—and that the mighty Tech Sector (XLK) is actually leading the way down.