All I Can Say Is… Be Prepared!
Are you ready for some volatility?
If you think the last few months have been crazy, wait until you see what the stock market has in store for us in coming days. An extremely important news event has the potential to take the market for one heck of a ride. As a result, next week will likely be one of the wildest investors have seen in years.
First of all, the highly anticipated Greek election takes place this Sunday…
That’s right. In a couple days, investor will know if Radical leftist Syriza party leader, Alexis Tsipras, has enough votes to beat his conservative New Democracy rival, Antonis Samaras.
I hate to say it, but if this vote doesn’t go the right way, we could be in for a serious case of market turbulence.
Which way is the right way?
Of course, the answer to that question depends on your perspective.
I don’t know about you, but I’d much rather see Samaras lead his party to victory. The 61-year old politician is running on a strong pro-European ticket, and supports the 130 billion euro bailout. If Samaras gets the vote, European debt worries would be one step closer to being put to bed.
On the other hand…
If you’re looking forward to a good old fashioned, 2008-style market panic, you may want to root for Tsipras. The 37-year-old upstart politician has promised to scrap the bailout deal between the European Union (EU) and Greece if elected.
Tsipras feels the austerity measures that came with the bailout are unfair and unduly harsh on Greek citizens. Not surprisingly, a lot of Greeks agree with him.
And that’s precisely why the market’s been trading on pins and needles lately…
If Tsipras gets the vote, you can expect things to get wild first thing Monday morning. You see, EU partners have already warned that if Greece doesn’t meet its budgetary promises, the country’s bailout funds will suddenly stop flowing.
The situation is troubling, I know…
But there are some positive developments set to counter the pending fiasco in Europe.
For one, global central banks are prepared to intervene in financial markets if the Greek vote goes the wrong way.
What’s that mean?
A global coordinated monetary easing effort will come our way if markets are thrown into turmoil by a Tsipras victory. Officials from G20 nations say their central banks are prepared to inject liquidity to stave off a potential credit crisis like we saw in 2008.
And that’s not all…
In addition to the Greek election, the Federal Open Market Committee (FOMC) meets this week to discuss US interest rates. Given the problems in Europe, along with a rash of weak US economic data, the Fed may hint at additional quantitative easing measures.
If that’s the case, long-term interest rates will be driven even lower, helping spur growth in the US economy.
What should you do considering the coming avalanche of market-moving news?
Most importantly, keep your cool. Don’t make fear-based investment decisions in the heat of the moment next week. If you’re really worried about this weekend’s Greek election, you’d be best served by raising cash ahead of time. In other words, you need to take action today to reduce your overall market risk.
However, unlike a lot of other investors, I don’t see a market collapse coming our way.
In fact, we may actually be on the verge of a major move higher for US markets. Central banks know they can’t stand around and watch markets fall into turmoil like they did in 2008. As a result, they’re ready to combat extreme market uncertainty with plenty of liquidity and monetary easing measures.
Bottom line…
Markets don’t fall apart when everybody expects them to. And that means this weekends Greek election may be a market buy signal in disguise.
Until Next Time,
Justin Bennett
Category: Foreign Markets
