Last few weeks have been very interesting and blog-worthy. It has been while since I wrote my commentary regarding various events impacting economy and markets. End of Jun had multiple deadlines - all of which passed and still discussions going on: Greece/Creditors bailout discussions, Iran and world powers Nuclear deal. Unfortunately none of these are closed - deadlines gone and extended multiple times with leaders meeting over weekends.
So what's in store over next few weeks and how it could impact markets?
Here is my take:
Greece and creditors would negotiate well into mid-night Sunday and may declare a last minute deal avoiding "Grexit" but it would only be temporary patch at best. The Greek drama would continue well till end of year creating repeat of Jun drama around holiday season. IMO, best course of action would be for Greece to come out of Euro and introduce local currency (which would be at 50% of face-value of Euro) and promote some structural reforms. Argentina did it successfully, Iceland did it recently. This major step could give a temporary shock to markets but in long run it would best for everyone involved.
Now coming to Iran nuclear deal. This has more political implications than economic (outside of course crude market). Getting Iran into mainstream could help stabilize middle-east and could be a feather in cap for Obama presidency. UN and other sections have not really worked in stopping Iran from developing nuclear knowhow. So not getting deal done won't change anything for Iran. So it would be practical for Kerry and Obama to accept reasonable terms and get the deal done. Again this could be short-term negative for crude market but market have already priced it in. So I won't be surprised if crude goes up when actual deal gets announced.
Now coming to Great "Fall" of Chinese market. Anyone who had studied history of markets could predict it. It has eerily similarity to Nasdaq market during .com bubble when index went from 2000 to 5000 only to crash below 2000 again (it took 15 years for Nasdaq to cross 2000 high) Shanghai index also went from 2000 to over 5000 to crash back to 3300. Due to short-term measures Chinese authorities have taken, market seem to have stabilized but I won't be surprised if selling starts again later this year and index falls back below 3000. So if I am an investor, I won't go anywhere near Chinese market for next few months.
So how all these events impact markets in US? Six months of 2015 had gone and indexes have not gone anywhere. They are stuck in neutral zone. While single day gyrations have increased due to all events mentioned, for year markets have hardly moved in any direction. Now that earnings season is about to get into high-gear and geo-political events finally coming to some conclusion over next 2 weeks could give markets direction it is looking for. I am personally investing in energy market (oil, solar) as well as bio-tech. Oil is contrarian play while bio-tech is growth play. Let's see how these trends turn out. Come Sept/Oct, watch out for "seven year itch". More about that in next blog!
/Shyam
So what's in store over next few weeks and how it could impact markets?
Here is my take:
Greece and creditors would negotiate well into mid-night Sunday and may declare a last minute deal avoiding "Grexit" but it would only be temporary patch at best. The Greek drama would continue well till end of year creating repeat of Jun drama around holiday season. IMO, best course of action would be for Greece to come out of Euro and introduce local currency (which would be at 50% of face-value of Euro) and promote some structural reforms. Argentina did it successfully, Iceland did it recently. This major step could give a temporary shock to markets but in long run it would best for everyone involved.
Now coming to Iran nuclear deal. This has more political implications than economic (outside of course crude market). Getting Iran into mainstream could help stabilize middle-east and could be a feather in cap for Obama presidency. UN and other sections have not really worked in stopping Iran from developing nuclear knowhow. So not getting deal done won't change anything for Iran. So it would be practical for Kerry and Obama to accept reasonable terms and get the deal done. Again this could be short-term negative for crude market but market have already priced it in. So I won't be surprised if crude goes up when actual deal gets announced.
Now coming to Great "Fall" of Chinese market. Anyone who had studied history of markets could predict it. It has eerily similarity to Nasdaq market during .com bubble when index went from 2000 to 5000 only to crash below 2000 again (it took 15 years for Nasdaq to cross 2000 high) Shanghai index also went from 2000 to over 5000 to crash back to 3300. Due to short-term measures Chinese authorities have taken, market seem to have stabilized but I won't be surprised if selling starts again later this year and index falls back below 3000. So if I am an investor, I won't go anywhere near Chinese market for next few months.
So how all these events impact markets in US? Six months of 2015 had gone and indexes have not gone anywhere. They are stuck in neutral zone. While single day gyrations have increased due to all events mentioned, for year markets have hardly moved in any direction. Now that earnings season is about to get into high-gear and geo-political events finally coming to some conclusion over next 2 weeks could give markets direction it is looking for. I am personally investing in energy market (oil, solar) as well as bio-tech. Oil is contrarian play while bio-tech is growth play. Let's see how these trends turn out. Come Sept/Oct, watch out for "seven year itch". More about that in next blog!
/Shyam
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