“Finally, it looks like a meltdown in Europe will be avoided, at least in the near term. Investors were rightly concerned over the crisis in Europe, but last Thursday’s plan addresses some of the issues, notably a larger haircut for investors in Greek debt and a start at recapitalizing the banks. As such, it will probably help avoid a crisis and removes a big source of near-term risk,” Koesterich wrote. [Year-End Rally?]
“That said, I don’t believe the plan resolves all of Europe’s longer-term problems. This plan removes the near-term threat, but it is likely that the issue will return in 2012. For now, with the economy stabilizing, valuations still cheap, and Europe’s problems temporarily moved to the side, I think stocks can move higher, and I would remain overweight equities,” the strategist added.
For broad stock exposure, he likes large-cap stocks that pay dividends.
The Greek referendum is a new risk to the European bailout and the outcome of the vote should have a big impact on the chances of a year-end rally.
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Max Chen contributed to this article.