Investor sentiment changes with the degree of action taken on the European sovereign debt issue. There’s a recurring theme taking place: investors get worried, stock markets go down, finance ministers in Europe take some new action, and investor sentiment improves. It’s a slow process that’s political and this is why it could take years for the problem to actually go away. Austerity is the new normal now and it’s already affecting global growth. But, the alternative represents too great a risk to global capital markets now. There is little patience left among large, institutional bond investors and they will walk on a moment’s notice, which will directly affect your equity holdings.

So we have continued choppy trading action in stocks with a slight positive bias, but there’s no great catalyst to be a buyer in this market. Investing in gold is one of my top sectoral investment themes. I also like large-cap, dividend-paying stocks, because they have the pricing power to keep earnings growing at a faster rate than revenues. But, there’s no rush to take action in this market. The consolidation should continue until the first half of June.

The price of oil seems to be the one of the best indicators for stocks once again. Speculators bid up oil prices a little too much and there was a divergence in this well-established trend. The commodity price cycle remains an important theme for the next several years. Commodity-related investments are worth sticking with.

It’s more difficult to be stock picking in a market that isn’t really going anywhere. There isn’t much of a tailwind right now. Speculative investors can consider new gold and silver investments as well as some oil and gas. Trading mostly off the action in the dollar, I see these commodities accelerating over the next several months.

It’s no fun thinking about investment risk, but I want to reiterate how serious the sovereign debt issue is and how dramatic the effect could be on your portfolio if things go wrong. We’ve talked quite a bit in this column about how big investors like certainty and how, in the absence of it, they follow a herd mentality of cash preservation at all costs. As we saw during the recent financial crisis related to packaged mortgages, the equity market almost came apart completely based on the poor judgment of only a handful of players.

The point I’m trying to make is that investment risk is always as important as, if not more important than, potential investment return. If your underlying goal is preservation of capital, your investment choices change and you become a lot more patient about choosing stocks in which to speculate. Being patient and being picky is a worthy strategy in the equity market. I’ve found that it pays off better over time. It’s really quite simple; when there’s no need to trade, you have more time to make better choices as the marketplace allows.