>Big Fiscal Deficits (CITI)

■ Unsustainable — Some countries’ fiscal positions are now unsustainable. Greece is the most worrisome. But government balance sheets in Portugal, Spain, Ireland and the UK also look problematic. Most Emerging Markets (EM) fiscal positions are strong by comparison.

■ Global Contagion — There should continue to be some contagion stemming from sovereign credit concerns. However, it is unlikely to be severe enough to drive a double-dip. Cheap valuations should limit the impact on global equities.

■ Local Resolution — There are a number of resolutions for big fiscal deficits. Some are positive for equities, others are not. Equity investors should tilt away from areas where fiscal issues are most acute until the problems are seriously addressed.

■ Easy Money For Longer — Sovereign credit concerns may dampen the recovery and are delaying the withdrawal of cheap money. We think Emerging Markets will benefit. EM governments have strong balance sheets and EM companies provide solid growth.

To read the full report: FISCAL DEFICITS