It's deja vu all over again for the markets. In 2008, it was all about the U.S., but this time, we've got Europe to blame. Concerns surrounding possible future debt defaults in Greece and elsewhere within Europe sent global markets plunging this week. Now, the problem has reached regional scope, and has the disturbing potential to expand across the globe. The situation conjures the prospect that the problems in Europe could throw a wrench into not only the anemic recovery in the U.S. but also the entire global economy.

"People have been complacent about the sovereign debt risk," Karl Mills, president and chief investment officer of Jurika, Mills & Keifer, said in an interview. He manages the Counterpoint Select (CPFSX) fund, which has a four-star rating from Morningstar. "You're starting to see a re-evaluation of risk relative to sovereign health. It parallels the credit crisis. You have the G7 with debt levels relative to GDP reaching 100% -- or in some cases, more than 100% -- and that's not sustainable. So a world that seems awash in debt but also has low interest rates is not a condition that's likely to persist."

Fear is back
Just last month, the VIX, which measures volatility and is often referred to as the "fear gauge," had dropped down to levels last seen in 2007. Yesterday, it rose 32% on the fear and uncertainty surrounding the European debt situation, and it had been up even more sharply earlier in the day.

The panic surrounding the crisis now saturating Greece -- and potentially Portugal, Spain, and Italy soon -- is reminiscent of the beginning of the U.S. subprime crisis in 2007. In the beginning, experts saw the crisis as contained. Only later did it snowball into a global economic shock that triggered the global recession. The very prospect of a repeat of that had markets around the world on edge this week. Specifically, fears of contagion or a breakdown within the European banking system -- particularly French and German banks -- kept investors on their toes.

What's next for Europe
At this point, Mills says that while Europe's situation is different, there are some similarities, and the problems might be difficult to contain. "If the will is there, the ability to stem the tide is there right now. The problem is, it's a bit of a political football," he said. "But it's a different situation than it was here [in the U.S.] ... There is no single entity in charge [in Europe] that has credibility. One of the things we learned here was you want to respond to these situations massively, unambiguously, and quickly. And that's not what's happening in Europe."

If the European Union is slow to act, Mills says it could lead to more turmoil, and greater selling pressure. "The market hates uncertainty, and you have several clouds of uncertainty right now to complement the growing trend of improving fundamentals," he said. Those clouds include the debt situation in Europe, signs of slowing growth in China, and the specter of regulatory reform in the health-care, financial services, and energy sectors. Add the massive oil spill in the Gulf of Mexico, which is taking a toll on not only BP (NYSE: BP) and Transocean (NYSE: RIG) but also the entire energy sector, and investors have plenty to worry about.

Find opportunity in uncertainty
Market noise aside, though, when there are clouds, there are opportunities, Mills says. "In rare cases, it's a good time to get out of the way," he said. "But the selling does seem overdone for a number of good companies."

As such, Mills says this pullback could be a good time for investors to upgrade their portfolios. "Go from small to large, to go from lower quality to higher quality, and focus on companies that are going to be less economically sensitive and should be able to generate good organic growth," he said.

Underneath the noise lies the fundamental story
Mills makes the point that it's important to differentiate between countries and companies. "They are tied, but they're not completely related," Mills said. "If the global economy falls out of bed, it's going to affect all companies, as we saw a few years ago. But you've seen Japan go through two decades of zero growth, and some Japanese companies have done exceedingly well, because they're global enterprises." Toyota, despite its recent problems, is a prime example. Mills points to German-based BMW as an example of a global company that recently reported strong results and raised its outlook.

Even with all the current uncertainties in the markets, Mills says the economic recovery is continuing. Growth is improving both domestically and in Europe. The first-quarter U.S. earnings season has been strong. At least for now, investors should find some comfort in the fundamental story for the U.S. and Europe.