(Editor's Note: My colleague Simon Hobbs shares his insights on the challenges the EU faces in finding a solution to its sovereign debt crisis, before leaders meet at the end of March. He also notes that PIIGS have outperformed the U.S. stock market.)
This year, PIIGS have out-performed all other developed markets as investors continue to close their underweight positions.
You would have made more than twice the return in PIIGS this year than even on the U.S. equity rally. Year to date, the S&P 500 is up 5.6 percent. But the Athens stock market has gained 14 percent. Italy's stock market is up 13 percent.
You can easily trade Europe contagion through ADRs of the two Spanish banking giants. You'd have made 21 percent this year on BBVA. Or 16 percent on Santander.
Look at the charts of these stocks and you'll notice they all have the same shape: rallying in the first half of January, then flattening out. That's because confidence grew that Euro Zone leaders were serious about keeping their currency bloc alive, then the broad market relaxed for one month.
But there are now signals of tension. The extra the market demands to hold Portuguese debt over benchmark German bonds has blown out recently towards what we had in December.
The leaders of the Euro Zone will soon be front and center, promising to grind through negotiations and engineer a comprehensive solution to kill contagion by the end of March.
Europe's leaders usually meet once every three months. But in March alone, they now plan to meet at least three times.