The most significant and identifiable risk on the horizon is the potential effects of the continuing sovereign debt crisis in Europe. In recent months, I have come to believe that the European governments and their economies will work through their challenges. Nonetheless, the economic slowdown in the euro zone will likely exert a small drag on U.S. exports.
And while European financial institutions have so far endured through the financial market turmoil in Europe, we must continue to monitor events to ensure that these troubles do not spill over to U.S. financial institutions. Of course, regardless of how the European situation plays out, it has already imposed considerable uncertainty on growth prospects for the global economy.