How to manage the Greece Volatility

Written by: Ryan Bouchey

We talked a lot about Greece over the weekend on the radio show given all the headlines it’s made these past few weeks. Whether you are invested in U.S. equities or international equities, the consequences from either a Greece deal or a Greece fallout will have an impact on your portfolio. With the news and direction appearing to change from day to day – is there any way you can limit your exposure to the risk of Greece leaving the Euro? Is the risk worth worrying about? Let’s dig in to some of the numbers first…

 
• Greece’s population only makes up 2% of the Eurozone
• Greece’s economy is even smaller than that – 1.2% of Eurozone GDP

 
The news on Monday seemed to indicate that Greece would negotiate to work out a deal with its creditors prior to $1.5 million being due to the International Monetary Fund on June 30th. This is good news for Greece’s prospect of staying in the Euro if in fact these measure can pass through Greece’s parliament. This may be a struggle due to the fact that these austerity measures have a chance of hurting Greece’s economy even further. So if Greece, its parliament and its creditors can’t come to terms, should we panic over a Greece Euro exit?

 
Our position is that you shouldn’t panic and keep a long term focus in mind. If you look at the figures above, Greece is a pretty insignificant player at this point if you take the Eurozone as a whole. Could we see a correction in developed markets or the U.S. if Greece exits? It’s possible especially due to the uncertainty surrounding a Greek exit. Unfortunately it’s incredibly difficult to try and forecast how political negotiations will play out. With that, we don’t suggest making any major moves at this time in your portfolio. If we do see a Greek exit and stocks take a hit – it may present some buying opportunities. Fundamentally the U.S. stock market and developed markets are in a position to continue to grow long term, which shouldn’t scare you from any short term volatility we may see in the coming weeks.