Daily Market Update – June 30, 2015 (8:45 AM)
Yesterday’s 350 point loss on the realization that a deadline was looming for Greece and the European Union to come to some kind of a short term agreement was, as these things usually are, well overblown.
I’m not necessarily of the belief that the market is entitled to just keep going higher and higher and I would like to see some kind of correction and ensuing increase in volatility, but yesterday’s action wasn’t really warranted.
The situation in Greece is also not the kind of thing that should be expected to supress our own markets for very long as, if anything, instability in Europe just makes us a better alternative, in the same way that the introduction of Quantitative Easing by the ECB made Europe a better investing alternative.
There can be no sane person who would have thought that a solution to the Greek debt crisis would come at any time other than at the 11th hour. To have waited until then to express surprise by dumping stocks doesn’t make too much sense, particularly if you still hold onto the belief that the market is a discounting mechanism.
This morning there’s some guarded optimism that a solution, at least for the current problem of a payment due to the ECB, may be at hand. Of course, that still leaves a payment that will bve due to the IMF in about a month and it leaves a bigger picture of just what happens if Greek debt is written down or forgiven, as the Greek government believes is appropriate, to the other debtor nations in the EU.
For the EU, Greece itself is small potatoes, but what it may unleash could be the real thing.
The market has a long way to go if it’s going to erase yesterday’s 350 point loss. This morning’s pre-open futures indicate that it may at least try, but that attempt wouldn’t even be close to recapturing the losses.
While a triple digit gain in the futures would ordinarily be a reason to feel optimistic, this morning it may only raise the quetion of “that’s all?”
While yesterday’s decline was the largest in quite a while, it is emblematic of a market that has alternated between ups and downs and made little net movement in 2015. Yesterday’s loss wiped out index gains for 2015. While for a single day a 350 point decline is big, if that was your margin between a gain and a loss after 6 months, you really didn’t accomplish too much in the course of those 6 months.
With a little bit of cash still remaining after actually having made a purchase yesterday, I would be more than content to sit back and let the market regain whatever it could and just bring us to Thursday’s sentinel event; the Employment Situation Report.
There’s reason to believe that the employment statistics will again reflect a strengthening economy and that could easily upset those worried about interest rates.
But that’s another issue where you have to wonder what it is that will catch anyone by surprise. Janet Yellen has more than telegraphed that an interest rate increase will be coming and that it will likely be small and it would be an automatically recurring one.
So why panic?
Why not discount the high likelihood that the rate increase will happen and just move on?
I know that there’s no answer to that question, but it is a continually frustrating one especially when it’s so apparent that there’s limited capability of learning from the past.
At least we’ll have earnings season beginning once again to maybe act as a counter-balance to external events and get stocks to react to fundamentals, even if only for a short while.