You can’t fail to notice the headlines relating to the economic crisis in Greece which havebeen unfolding rapidly over the last few weeks.
In short, Greece have become the first developed nation to default on a debt repayment to the International Monetary Fund (IMF). They have defaulted on the repayment because, essentially, they have no money left. The aggressive investment plan which they used to try and stimulate the economy and create employment hasn’t worked. The European Union have agreed to bail them out once more, but with strict austerity conditions. Greece will vote on whether to accept the EU’s bailout plans this weekend. If they are rejected by the Greek voters there is a chance that Greece could leave the EU at some stage in the future.
All of this creates uncertainty and markets hate uncertainty. The UK FTSE100 index (which tracks the stock prices of the 100 largest companies listed on the London Stock Exchange) is down about 9% since the situation started to unfold a few weeks ago.
The issue has however been amplified by the markets – the Greek economy is tiny on a global scale and represents only 6% of Germany’s Gross Domestic Product (GDP) and 1.2% of the GDP of the EU.
Perhaps the market volatility is more related to concerns about the structural stability of the EU and the Euro in particular – after all, if Greece had their own currency they would simply be able to, literally, print more money so that the Government could keep spending it. Quite like we have done here in the UK with our quantitative easing program.
Either way, I am pleased to report that we’ve not had a single enquiry from a client who is concerned about their portfolio in light of this volatility. Our clients all benefit from a diversified investment portfolio that is designed to match their long term goals and objectives. Volatility along the way always needs to be expected however, but the level of volatility is always driven by the client’s appetite for risk and capacity for loss. Clients who don’t want or need to take high risks simply shouldn’t (and don’t) take it, so can sleep at night knowing that the Greek crisis isn’t going to impact their long term strategy.
My passion for travel is already a standing joke in the office. Believe it or not I am (literally) just off to book a holiday to Greece (or a Greek island) – the crisis might create a few bargain opportunities in the travel market, as well as the stock market!