With the equity markets of Spain and Italy showing strong advances far exceeding those of more stable economies, some believe that the worst is over for Europe. It is our view that this is a premature conclusion and that, in reality, the European Central Bank is desperately concerned about problems in southern Europe. This concern is justifiable.
Investors often confuse stock market gains with economic health and that's a mistake. Often times, markets price recovers well in advance of actual economic growth, and we believe this is what is occurring in Europe.
The problems in Europe are far worse than the United States as there is not a single currency that can support the entire euro zone.The United States has the U.S. dollar and while many scoff at the notion that this is a strong currency, it is deemed (at least for now) a safe haven for the rest of the world. When fear takes hold, the world buys dollars despite $16 trillion in debts.
(Read more: Is the Dollar Dying? Why US Currency Is in Danger)
Europe, on the other hand, must deal with competing interests between countries and it is very difficult to implement a coordinated policy given the conflicting goals and philosophies throughout the euro zone. For that reason, the European Central Bank has far less influence on European countries economies and dangers in the European economic system are less easily controlled.
Germany continues to be a bright spot. But unless France puts its economic house in order, Germany may stand alone as a strong economy in Europe. And frankly, Germany cannot do it alone.
(Read more: Will the euro 'speak' German or European?)
Unemployment in many countries throughout Europe exceeds 10 percent with the unemployment rate for under 25 at over 40 percent in some regions. Real estate prices have not recovered and capital expenditure investment by companies is muted at best. Banks have massive problems and have huge amounts of bad debt still on the books that have not yet been dealt with. With banking problems still a concern, lending has slowed and this further has impacted economic growth. Basel III has not yet been imposed and this will no doubt further constrain lending.
The global economy needs Europe to recover for a sustained recovery. There are signs of stabilization and that's a positive. Banks slowly are recapitalizing and that's a positive as well. Conditions do not appear to be getting worse which is a victory of sorts. But recovery is still out of sight for Europe and the stumbling recovery will impact global markets around the world.
Expect to see more headlines focused on Europe (remember the good old days when we were all on the edge of our seats about Greece?). Also, expect additional volatility in US and world markets because of drama playing out in Europe. We believe there are selective opportunities available in Europe, mostly in staples companies and certain countries. But is all about being selective especially after this latest market run.
(Read more: Why euro zone slowdown should worry the world)
Michael A. Yoshikami is the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also chairman of the firm's investment committee.