Just two months ago the beleaguered second-tier European economies were the darlings of global equities. As of March 25 the MSCI Greece country index was up 22.9%, while Spain, Portugal and Ireland were all turning in double digit performances. Their debt problems hadn’t gone away, but investor sentiment appeared predisposed to look on the troubled nations with kindness and favor. For Greece, anyway, that song is over for now. The MSCI Greece index closed on May 24 at -7.6% year to date, thus falling 30% from its springtime highs. Feel like déjà vu all over again? May was crisis month in the Eurozone in 2010, and thus it is again. It’s the same set of problems – a moribund economy with no catalyst for organic growth as far as the eye can see, against a backdrop of global economic uncertainty and a great deal of internecine bickering among EU parties as regards what to do – or what not to do. Of course, when you say that you have the same problems you did a year ago it doesn’t really mean they are just as bad – it means they are one year worse.

The Eurozone debt crisis has not really been a front page issue for most of 2011 – it has been crowded out by numerous other stories of a seemingly more dire nature, from crisis flashpoints in the Middle East to natural (and man-made) disasters in Japan, sky-high oil prices and all the rest. But it has never gone away, and its presence acts as a continual reminder of the fragility in market valuations. The year to date has on balance been kind to risk assets – the Russell 3000 is up around 7% – but it has not been the kind of solid performance that inspires confidence. Indeed, many of the market’s bright spots so far in the year have been in those European equities markets. The MSCI EU index is still up 7.2% year to date, but the luster seems to be fading that region. Japan is already dragging broader developed international indexes lower – the MSCI EAFE index is up only 2.4% year to date largely because of Japan’s weakness and generally lackluster performance so far in the developed Asia Pacific markets of Singapore, Hong Kong and Australia (New Zealand, oddly enough, is doing quite well in comparison to its regional brethren). And emerging markets in general have been having a bumpy ride of it so far this year, with the key growth markets in a bit of a holding pattern and the usually dynamic regions of Asia and Latin America trailing the broader indexes.

In the US the performance leaders continue to be in midcap generally and in growth over value. Interestingly, though, the Russell 200 Megacap index and the Russell 2000 Small Cap index have just traded places for the first time since January, with megacaps now turning in a slightly higher performance for the year to date. There is no small contingent of US equities investors who would love to see their long-awaited megacap rally take place – it’s been a case of Waiting for Godot for longer than any of them would care to remember. Time will tell. The economic picture continues to be muddled – housing figures and durable goods numbers posted this week were underwhelming, the consensus economics forecast is below 3% again (it was around 3-3.5% at the beginning of the year) and the jobs outlook continues to be muted even though weekly jobless claims have continued to fall. It may well be time to recall the time-honored adage: Sell in May, go away. Or not.