Three events in financial markets have received significant media attention in the last week: a potential Greece exit from the Eurozone, a potential default by Puerto Rico on its bond holdings, and the significant decline (after a rapid advance) in China’s equity markets. The Coldstream Investment Strategy Group thought it important to cut through the “media noise” and let you know our views on these events.
Near Term Uncertainty in Greece
As you may have heard, Greece missed a $1.7 loan billion payment to the International Monetary Fund on Tuesday. While this event and the closure of the Greek banking system are dominating news coverage this week, a $3.9 billion bond payment due to the European Central Bank on July 20 is much more important to world markets, since failure to pay would put Greece into a formal state of default. The situation remains extremely fluid, with developments coming nearly hourly. It is unlikely that current negotiations will lead to an agreement prior to a scheduled July 5 referendum, which will indicate whether the public will accept further austerity in order to stay in the Eurozone. Since the current government was elected on an anti-austerity platform, it may collapse if the referendum passes or if a deal on further spending cuts and tax increases is struck in the meantime.
Potential OutcomesREAD MORE