Global markets have been shaken in recent weeks by concerns that debt trouble in countries like Greece, Portugal and Spain would unravel a budding global economic recovery. And David Hefty, chief executive of Cornerstone Wealth Management, told CNBC that Europe’s sovereign debt issues are just beginning.
“When you look at what’s going on right now with the PIIGS [Portugal, Italy, Ireland, Greece, Spain]—that’s just the tip of the iceberg,” Hefty said.
“When you go to the larger economies in Europe—Germany’s total debt to GDP is over 170 percent, France is over 230 percent and UK is over 400 percent.”
During the Asian debt crisis in 1997, Hefty said the Asian countries only had around 160 percent total debt-to-GDP, making them look like “fiscal conservatives” compared to the European nations today.
“Back in January, we definitely hit an intermediate top,” he said of the markets. “So we moved our assets from out of the stock market into cash.”
Although Hefty doesn’t see a big market decline coming, he expects a volatile sideways pattern coming in the next few weeks.
“At the same time, the markets can’t go sideways forever—it’s either got to break and go up, or down,” he said. “But when you own an asset, that equals risk and when all the fundamental characteristics of an uptrend disappear and there’s more downside potential than up, then you have to go to the side.”
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No immediate information was available for Hefty or his firm.