Have things really been sorted out in time for everyone to forget about Greece as the summer holiday season starts in earnest? (Unless they are holidaying on one of its islands of course)
The ‘too good to be true’ maxim has seldom seemed more appropriate than in an assessment of what this weekend’s developments between Greece and its creditors mean for investors in European equities, and in fact, Greece’s place in the eurozone.
While stocks were quick to offer a resounding, if short term, approval of the yet-to-be signed off deal, markets experts were less convinced.
“This weekend we saw deep divisions come to the fore between the eurozone’s two most important members, France and Germany,” said Stephanie Flanders, chief market strategist for Europe at J.P. Morgan Asset Management. “We also saw, once again, the challenges of responding to crises within a single currency area that does not have a single unified body for making decisions. None of this bodes well for Europe’s future. But these are long-term concerns that are unlikely to derail the economic recovery or greatly concern investors over the short to medium term.”
“What investors will focus on is that keeping Greece in the eurozone was almost certainly the best scenario for Europe and financial markets—and it now seems the most likely outcome,” Flanders continued. “Tough challenges remain and, given recent history, no one should be taking anything for granted. But once the dust has settled, market participants should be able to focus on the fundamentals in the eurozone outside of Greece, which accounts for more than 98% of the region’s GDP.”
Chris Iggo, fixed income CIO at AXA Investment Managers, also pointed to the long term damage that the crisis may have caused as reason to put the champagne on ice.
