Market Update & Outlook

Early this morning it was confirmed that Greece voted ‘no’ to Europe’s austerity measures meaning that they are potentially closer to exiting the Eurozone. From here there is still a chance that a deal between Greece and Europe can be made, although this now looks very challenging.

For a deal to be made European creditors may need to give significant ground, and with no further financial aid likely, Greece looks set to miss the €3.5 billion payment due to the ECB on 20th July. The ECB now needs to decide whether to extend additional funds to Greek banks, which are expected to remain closed and are reported to run out of physical cash within the next few days. Europe’s leaders are meeting tomorrow to discuss the situation and hopefully come up with some form of resolution.

Financial markets have reacted negatively to the news and may continue to fall given the uncertainty surrounding the fate of Greece. We note that Central banks around the world stand ready to intervene and provide further liquidity and support for markets if required, and this should provide a floor for the market sell-off in the short term. The situation in Europe may also give the US Federal Reserve reason to delay their decision on when to raise interest rates which will also be positive for markets.

At this stage we are not recommending any changes to our portfolios which are positioned conservatively given the heightened volatility and potential for further market downside in the short term. Fund manager distributions which will be paid in July will also provide us with an opportunity to allocate cash to strategies that look attractive given the sell-off.

If you would like more information about investments or your personal situation please email mpw@morrows.com.au