Friday, March 5, 2010

Equities: Can consumption take over? Greece slips off the radar screen for now $EWG

Greece seems to have slipped off equity market radar screens for the time being. In our view, it is the dominance of short-term investors in equities that is causing the market to react to such macro headlines as Greece’s potential state bankruptcy, as the direct risk to equities should Greece go under is in fact modest, and we therefore need to fear the implications of the southern European deficit continuing via Portugal, Spain and perhaps even Italy to keep the Greek story on the boil. On the plus side, the crisis in Greece has prompted a renewed focus on budgetary discipline and responsible fiscal policy, and the OECD countries will definitely be tightening fiscal policy from 2011 onwards.


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