I don’t think we are telling anyone anything they don’t know by suggesting financial markets tend to get swept into a period of heightened uncertainty due to a global macro event du jour. You don’t have to go very far back into the memory bank to remember the short-term volatility created by US Government shut-down, European debt crisis, global financial crisis, bird flu, Y2K … the list goes on and on.
Taking over the headlines recently and fast becoming the current global crisis of the day is, of course, the long-looming Greek debt crisis. While we hesitate making predictions on the outcome of these types of events, let us address the Greece situation in a general sense.
If you’d like to understand the key factors involved in this economic impasse, The New York Times has been running “Greece’s Debt Crisis Explained,” updating it regularly as events unfold. If you’d like to know more, or you’re wondering whether there’s something that you, as an investor, should be doing in response to the Greek crisis we are happy to speak with you anytime. Here are some points to bear in mind.
First, as always, we don’t know what the future holds, for Greece or anywhere else. Even more to the point, we don’t know how the market will react to whatever does happen in Greece. This is why we advise those who already have a carefully planned, globally diversified portfolio in place, to keep that portfolio in place (unless your own long-term objectives or circumstances have changed).
Others in the popular press or those who are transaction-based financiers might be tempting you to react to current events by buying this, selling that, or otherwise shifting around in reaction to the winds of change. They may be well-versed in financial economics, with impressive credentials and seemingly convincing reasons for why it’s time to act now. But if we eliminate the fancy trappings of their arguments, we’re left with the same essential evidence: It’s not good or bad news that sets future market pricing, it’s whether the next news is better or worse than the market has been expecting.
Peer into the future all you want, but an unknown reaction to an uncertain outcome is inherently unpredictable, no matter what we know now. Approach anyone who claims to believe otherwise – including your own inner doubts – in the same way you would consider accepting a Trojan Horse through the gates that secure your wealth.