Deals in Greece and Iran Send Stocks Higher and Oil Lower
After a month of uncertainty regarding the future of Greece in the Eurozone, it appears that a deal to bail out the indebted nation is now within reach. The proposal includes a $94B loan in exchange for austerity measures very similar to the ones the Greek people voted down in last week’s infamous referendum. Stocks around the world welcomed the news, with the Stoxx 50 gaining 1.7%, the French CAC 40 gaining 1.9%, and the German DAX gaining 1.5% during Monday’s trading. The Greek parliament still needs to approve the terms of the proposal before the aid can be unlocked. Given the backing of leftist leader Tsipras and the lack of an alternative that keeps Greece in the Eurozone, it appears that the approval will be granted. While this may very well be akin to kicking the can down the road yet again, having certainty, if only over the short term, is something that the markets will appreciate.
Also moving the markets this week is the nuclear deal, two years in the making, which was reached between Iran and the U.S. The polarized commentary surrounding the geopolitical implications of the deal aside, the potential for Iran to begin exporting oil and, in turn, adding supply to the global markets is sending the price of oil lower. Once sanctions are lifted, which would not be until Iran complies with certain terms of the agreement, Iran’s oil minister estimates they will be able to begin exporting 500,000 barrels a day with the potential to increase that amount to 1 million barrels per day within six months, according to Bloomberg’s Grant Smith. Brent Crude fell 1.9% for the week* as of the time of this writing, continuing a downward trend that commenced at the beginning of July. Concerns of a global economic slowdown led by China, combined with the potential for the Iranian nuclear deal, have caused Brent Crude to fall 9.4% since the end of June to now trade at $57.21 a barrel.
Whether you are looking at Equities, Fixed Income, Commodities or Currencies, volatility certainly has reared its head this summer. While this volatility presents opportunities for disciplined investors, it also leads to individuals becoming overly concerned with managing short term “headline” risk and ignoring the underlying fundamentals that drive returns over the intermediate to long term. If you are concerned with the implications the geopolitical events discussed above, or if you are simply looking for a new set of eyes to review your existing portfolio strategy, please speak with your Hennion and Walsh Financial Advisor or a member of the Hennion and Walsh Asset Management Team.
*Monday 7/13 – Tuesday 7/14
Sources: Equity Market, Fixed Income and REIT returns from JP Morgan as of 7/10/15. Rates and Economic Calendar Data from Bloomberg as of 7/13/15.
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Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion and Walsh cannot guarantee the accuracy of said information and cannot be held liable.
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