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Greeks done good – so where’s the rally?

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by Peter Switzer

We’ve got a Greek deal. Let’s Google the experts and remind them they were wrong. But the question the journalists are asking now is — so, where’s the rally?

Of course, to anyone who actually invests real money in the market they know what the Greek deal did was prevent a big sell-off. For Mammon’s sake the US stock market is up over 20 per cent since October and the Dow Jones index is 10 per cent short of its all-time high — a record created in the madness of cheap money, sub-prime loans and dopey derivatives that caused the GFC.

Wall Street gains

For the record, the Dow ended 6.51 points, or 0.05 per cent, higher to 12,890.46 while the S&P 500 was up 1.99 points, or 0.15 per cent, to 1351.95.

The reality is that serious investors want to see a lot more out of Europe over the next two months that adds to the Greek deal and this will start up some more momentum for stocks. Once there is more confidence about what European Union (EU) governments are doing to manage their debts, yields will start to fall, the European Central Bank will extend the money supply in the eurozone and then the focus will go back on economic data as well as company fundamentals.

Further anxiety

Before this happens, there will be some anxiety about whether Portugal and Ireland put their hand up for some Greek-style debt charity. These are potential challenges for the EU and the banking system but we’re getting closer to getting out of the stock market woods that we were lost in for most of 2010 and 2011.

On the subject of economic data, jobless claims fell to the second-best reading for close on four years.

Another interesting development was the fact that the ECB didn’t cut interest rates which tells us that the European Central Bank is feeling more comfortable about the EU’s economic outlook.

Let’s hope they are right.

A milestone

Today is an important milestone and as the old NRL coach Jack Gibson might have said: “The Greeks done good.” The other part of that famous line was “played hard”, but that all lies ahead for the Greeks specifically and the Europeans generally.

But the bottom line is — we have reached another stage of the muddle-through process, which will prove the doomsday merchants and the “sell all your shares” merchants wrong. Go the Greeks!

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Friday, February 10, 2012

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