The headlines are ugly. The Greek economy teeters on the brink of collapse with a possible exit from the EU/Euro. Puerto Rico may delay some debt payments. China’s stock market has suffered the greatest drop since at least 1992, imploding over 25% in about three weeks.
Sovereign debt markets, specifically the German Bund and to a lesser extent the US treasury which are viewed as “safe haven” also been also hurt, perhaps on expectations of greater economic growth in the intermediate future.
I think it is safe to write nations around the world have taken on unprecedented amount of debt all with the hope of igniting some growth. In many aspects, however, things that most thought would happen have not.
Speaking of which, yesterday’s market reaction to the outcome of Greece’s referendum was a relative nonevent. If the headlines were written 5 years ago, the averages would be down 1000 points, not 45 points.
Is this result that most of Greek debt is owned by the IMF and ECB? Is it a function that Greece is a relatively small economy whose GDP is about half of Wal-Mart’s revenues? Or was the muted response the outcome of the massive ECB QE program?
Like all, I hope there is not a delayed negative reaction.
Many times I have commented about the market’s bifurcation, defined as a massive flow of funds from one momentum name to another. Is this about to change? The past two weeks I have read several reports commenting about the value in “value” stocks and how the market may be ripe for such a transition.
For value oriented investors, such a transition cannot occur quickly enough.
Last night the foreign markets were down. London was down 0.12%, Paris down 0.59% and Frankfurt down 0.44%. Japan was up 1.31% and Hang Sang down 1.03%.
The Dow should open moderately higher on the belief there will be a positive solution to the Greek problem, an open ended statement as I am not defining “positive solution.” Moreover, second quarter earnings season commences tomorrow and the hurdle is low, perhaps suggesting possible upside surprises. The 10-year is up 13/32 to yield 2.24%.
