The following is an excerpt from JACK HOUGH | July 24, 2012 | Smartmoney.com |
“Freefall,” “crisis,” and “carnage”: Spain’s stock market has inspired recent headlines with these words and worse.
MSCI Spain, a broad index, fell 32% this year through Friday. That compares with a 6% decline across the European Monetary Union, a 4% gain worldwide, and an 8% gain in the U.S., according to MSCI.
Brian Singer, manager of the recently launched William Blair Macro Allocation Fund (WMCNX), sees a buying opportunity. Investors who plunk money into a broad basket of Spanish shares today could see average returns of 20% a year over the next several years, he says.
The stock plunge in Spain is related to grim economic trends that are stoking fears of a default. Spain’s gross domestic product, a broad measure of economic activity, likely contracted 0.4% in the second quarter from the first, or 1% in annual terms, its central bank said Monday.
Shrinking GDP helped raise the country’s debt as a percentage of GDP to 72.1% from 68.5%. To reduce its deficits, Spain raised taxes and slashed spending on healthcare, education, unemployment benefits and more. But as its economy shrinks, its tax revenues are declining, and unemployment stands at 25%.
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