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Greece vs. Lehman Brothers: One Significant Difference

Athens, Greece


The No Deal Scenario

Using common sense as a guide, most market participants believe another kick-the-can deal will be made with Greece. If we assume, hypothetically, the lower probability scenario plays out (no deal), could the markets be facing a scenario similar to the collapse of Lehman Brothers in 2008? According to Marius Daheim, senior consultant at SEB via Reuters, there is one significant difference:

"There are no legal procedures for a member country's exit from European Monetary Union. Greece cannot be forced to exit. However, once having defaulted, Greece may chose to negotiate an exit agreement. This would incur strong losses for its creditors, but as these are mainly European taxpayers, the fallout on financial markets should be contained. Grexit is not going to be another Lehman-type event."


Breakout or Stock Market Fake Out?

This week's stock market video looks at the bigger picture within the context of Greece-related uncertainty to help assess the odds of the recent breakout in the stock market avoiding the tag "failed breakout".


Video: Stocks: Breakout or Fake Out?


Investment Implications: The Weight Of The Evidence

It is too early to assess the longer-term implications of last week's bullish action in stocks. The positive step by the bulls becomes more meaningful each day the S&P 500 can close over 2090. Given what we know today, a equity-heavy allocation remains prudent from a risk and reward perspective.

 

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