Eurozone enters final stage

Equity investors should focus on high-quality and defensive stocks in the next 12 months, as the Eurozone crisis enters what might be its final stage, according to global chief investment officer for equities at Fidelity Worldwide Investment, Dominic Rossi.

Rossi also believes investors need to keep a close eye on the bond yields of Belgium, Austria and France. Furthermore, a strong case can be made for corporate and inflation-linked bonds.

“Given we are talking about AAA sovereign nations now becoming involved, this has to be the final phase of the crisis, simply because there is nowhere else for contagion to spread,” Rossi said.

The attendant volatility in the current financial markets should also mark the last down-leg of this crisis, he said.

“The speed at which the crisis has moved from Italy to Spain and now core Europe has been alarming, but it also suggests a crescendo,” Rossi suggested. “The evolution of the crisis path now suggests a tipping point at which quantitative easing by the European Central Bank becomes palatable to Germany as the only option that avoids a Eurozone break up.”