Uncertainty ahead for Greece
Valentijn van Nieuwenhuijzen, head of strategy, multi-asset at NN Investment Partners (NNIP) argues that while political uncertainty in Greece is set to continue, the Troika strategy could reduce political risk in the rest of the region.
Signs of contagion of the Greek drama to other parts of financial markets have only very recently started to emerge. The worst possible outcome would still be significantly smaller in terms of its global impact than it would have been during most of the last five years.
But still it would be very disruptive and trigger turmoil in financial markets for at least a couple of weeks. So, while still looking for new opportunities to add risk on the back of ongoing faith in the resilience of underlying fundamentals globally, the edge of chaos on which Greece is now balancing weighs on our risk appetite in the near-term.
The underlying trend in timely and reliable indicators of the global business cycle still point towards further strengthening. Moreover, the less volatile and more domestically oriented parts of the global economy like labour markets and service sectors have remained much more resilient in most parts of the world.
The big strategy of the Brussels group (formerly known as the Troika) behind all this is to break the political will of the Greek side. This is likely to cause further increased political uncertainty in Greece but it will also serve to reduce future political uncertainty in the rest of the region.