What does the Greek Crisis mean for financial markets?

Weighing the Week Ahead: What does the Greek Crisis mean for financial markets?

Courtesy of Jeff Miller of Dash of Hope 

The calendar shows a fair amount of economic data in the coming week, but attention is likely to be focused abroad. After many years (some would say decades) of percolating, the issue of Greece and the Eurozone is coming to a conclusion. I expect this week’s theme to be:

What does the Greek crisis mean for financial markets?

Prior Theme Recap

In my last WTWA I predicted that market participants would be focused on the Fed, wondering if they had heard the message from the markets. Some readers commented that Greece was likely to take center stage. They were right at the start of the week, and also at the end when even the most voluble pundits were running out of comments about a predictable Fed meeting. Doug Short’s excellent five-day summary always captures the story in one great chart.

Feel free to join in my exercise in thinking about the upcoming theme. We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react. That is the purpose of considering possible themes for the week ahead.

This Week’s Theme

The Greece story has been high on the list of worries for several years. Some observers suggest that the underlying problems are better measured in decades.

This week features a solid data calendar, but nothing really dominates. The Greek story is both timely and compelling, with the market effects uncertain. It is a perfect paradise for pundits. I expect market observers to be asking:

What does the Greek Crisis mean for financial markets?

The Viewpoints

There are several basic viewpoints, ranging from best to worst as follows:

1. An agreement will be reached at the last possible moment. (A case from the Greek perspective. I rarely cite anonymous posts, but this group of Amsterdam professors have been informative on this document, with well-documented analysis).
2. A Greek settlement will encourage other European nations to seek concessions.
3. Greece will default

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