Investors must closely monitor Greece ahead of possible ‘Grexit’ from the Eurozone

17 Jun

There are many theories as to what the Greek government is doing in regard to dealing with its debt crisis. But in my view it is looking like they actually want to leave the Eurozone.

This saga in Greece is likely to come to a head on Thursday’s crunch meeting with euro group ministers, and as I was quoted as saying in today’s Wall Street Journal: “Investors should not ignore the growing noise coming from Athens.”

The ever more defiant tone coming from Syriza to my mind would strongly suggest that a Grexit is most definitely on the cards.  As it stands now, it looks as though Athens is standing firm in its negotiations with the IMF and the Eurozone institutions, and would rather leave the Euro than be forced to reform the economy.

Prime Minister Alexis Tspiras is placing his desire for supremacy and power much further above his wish for Greece to stay in the Eurozone.  The last thing Tspiras will want to do is lose all-important credibility, which is likely should he bow down to austerity demands.  If he did this, the assertive left of his party will become non-aligned and he would, I believe, lose power.

As such it would appear we’re on course for a Grexit (Greek exit) – and this is highly significant for investors.  This is despite not many being highly exposed to Greek bonds or equities.

Why it is so important is that the repercussions will hit global capital markets and could be considerable.

One reason for this is that once the standard is set for a country to abandon the euro, investors will subsequently look to a risk premium on other Eurozone countries with severe debts.

Hence investors’ returns will be heavily impacted as a direct result of such volatility, so taking this into account, I would advise investors to review their wealth management portfolios after Thursday’s meeting between Greece and the finance ministers within the euro group.

It is no surprise that shrewd investors with highly diversified portfolios will stand to lose the least.  Again this highlights the requirement for multi-asset investing across global regions and asset classes, as a way to mitigate market instability.

This issue is rapidly coming to an end for Greece, so it is paramount that investors stay on top of the situation, and it is our job as advisers to help clients ensure they mitigate the risks and seek out new opportunities.

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