I remain constructive on markets and believe they are poised for gains barring a collapse in the EU. Investors are broadly in risk off mode, leaving them a lot of room to buy if the situation stabilizes.I believe stabilization is the most likely eventual outcome, although it might take some more turmoil to compel EU officials to act.
In George Soros' book The Alchemy of Finance, Soros describes a model for financial crises. There is usually an imbalance that is ignored for years until a crisis point is reached. Markets go to the brink, which forces authorities to act, thereby solving the crisis. The first half of the model for a crisis certainly fits the current situation in Europe. We are at a crisis point in Europe and markets are going to the brink. It seems as if EU officials are thoroughly worried, which is a good thing. The lower markets go the more likely they are to act forcefully.
My portfolio is positioned for a bullish outcome but I am also leaving room for myself to be wrong. My entire portfolio is comprised of defensive, value stocks that should perform relatively well in a slow economy. Many defensive businesses are trading at similar or cheaper levels to cyclical businesses, which makes it a no brainer for me. I am also partially hedged. While I will certainly not prosper if the market collapses I will likely survive.