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Greece: A Logical Way To Monitor Risk To Your Investments

Fear Of The Unknown Is Difficult To Manage Against

If you have cash to invest, there is always a logical reason to "wait until things improve". Greece is a legitimate concern for investors, but making decisions based solely on fear is a recipe for disappointment.

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How Concerned Is The Stock Market About Greece?

The chart below shows the weekly performance of a global stock ETF (ACWI). If Greece was on the verge of causing some type of financial market Armageddon, we would not expect to see a new weekly high being made in global stocks last week (see below).

ACWI iShares MSCI ACWI Index Fund Nasdaq GM + BATS


Taking A Look At The Big Picture

Financial markets are always weighing pros and cons. Are there reasons to be concerned? Yes, there are always reasons to be concerned. However, as shown in this week's stock market video, the weight of the evidence still aligns with the bullish case for global stocks.


How About Europe?

The EAFE Index (EFA) has significant direct exposure to countries in the eurozone (see table below).

The EAFE Index also made a new closing high last week, telling us the market is not expecting a major negative event in Europe.

EFA iShares MSCI EAFE Index Fund NYSE + BATS


Investment Implications - The Weight Of The Evidence

Is it possible that Greece derails the bull market? Sure, it is possible, but it is not a high probability outcome at this time.

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As of last Friday's close, our market model was still calling for an equity-heavy allocation based on the evidence we have in hand. If the facts change, we are happy to make the necessary adjustments. If you want to expand this analysis to additional markets, last week's article on strength in foreign markets is a good place to start.

 

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