Markets Tumble on Grexit Risk

Markets Tumble on Grexit Risk.

The FTSE 100 Index fell nearly 1% today and 200 points down on the week to close today at 6,804.  Elsewhere, Europe, particularly the German DAX and French CAC fell 1.26% and 1.33% respectively.

The cause was fears that Greece will default on its debt interest payments given its decision to delay repayment of €300 million to the International Monetary Fund.

Greece has postponed repayment until the end of the month and this caused a stir in the market with fears that Greece will:

• Default
• Exit the Euro (the so called GREXIT).

Comment

We have been saying all along that Greece is in trouble and the only solution is to come out of the euro, with c 50% unemployment and mounting debt that it cannot repay.  It needs the drachma again so that it can print money and pay its people and get the internal economy moving which, in turn will generate exports for income to then pay back debt. If not, we believe ultimately Greece will default unless its debts are wiped out (another disaster).

Given this risk, we cannot knowingly suggest that clients invest back into stock markets.  Whilst it is tempting to reinvest given the falls across most global markets this week, with only China bouncing up by 1.54% and 8.5% on the week, things are certainly volatile.  Even the US fell despite fantastic jobs news with over 280,000 new jobs in May alone.  Markets will run like a roller coaster this month ahead of any Greek solution.  If you are brave, get in and then out quickly, if like us you are cautious and wary, stay out and in cash park.