The minute-to-minute news regarding Greece has had market participants glued to their screens and terminals, with no clear idea on what will finally transpire.
It’s a situation that’s reminiscent of the summer of 2012, when the Eurozone crisis had reached its zenith. And yet, despite the rapidly changing headlines and a Greek exit from the Eurozone now more of a reality than ever before, financial markets have remained calm and relatively unchanged. Investors, it seems, are of the mindset that many things have changed in Europe since 2012, and those changes will protect the system from the kinds of shocks that ripped it apart three years ago. Here’s what a few fund managers have to say:
David Spika, Global Investment Strategist, GuideStone Funds:
“The level of uncertainty is definitely high but the good news is that the markets haven’t reacted in a way that would indicate real concern. U.S. and European equity and bond markets, as well as the peripheral markets of Portugal, Italy and Spain are not selling off as they would have if investors were anticipating some sort of crisis.
And though volatility has picked up, it seems to be more of an opportunity for investors to sell and reposition, rather than a “let’s head for the exit and rethink our investment strategies” situation. Also, gold prices would have gone up if there were a major crisis, and they haven’t.
We think this is because things are different now than they were in the second quarter of 2012. Today, the U.S. and European economies are much stronger than they were and the European Central Bank (ECB) is acting in a much stronger way than before than before. The ECB has big back stops in place with quantitative easing (QE) and other measures, and more importantly, most of Greece’s debt is no longer in the hands of banks. We’ve known since January that there would be a line in the sand, so this isn’t a sudden shock like the Lehman Brothers failure was. If we were to see a major change, then it would have to be a situation where the consensus would believe that something would happen with the European Union that would cause global instability. But even the likelihood of Greece leaving the euro is not leading to over reaction in the market, and we’re not seeing anyone extrapolate that to Spain, Portugal, Italy and Ireland. The economies of Spain and Ireland have, in fact, done very well, largely because the very aggressive QE plan has done a lot to improve the financial conditions of those markets.” Paul O’Connor, Head of Multi-Asset Team, Henderson Global Investors: