Geopolitical concerns are causing investor angst in Europe, fueling a spike in volatility levels.
As of this date, investor concerns are running high about whether or not Greece will stay or leave the Eurozone currency union.
When confidence in the economic stability of Greece dwindled, yields shot up to compensate for the additional risk attached to investments in Greek bonds.
Two bailouts got Greece up and running. After trending downward until early 2012, the Athens Stock Exchange Composite Index began to show signs of life.
The Syriza party has said it wants Greece to stay in the Eurozone. But disobeying its regulators could threaten Greece’s position within it.
Greece is seeking a bailout extension, but this will only be made possible if it agrees to the troika’s conditions—mandatory economic reforms.
The outlook for global equities continues to look better than investments in cash and bonds. However, it’s important to know what could go wrong in 2015.
You can safely expect volatility to be one of the characteristic features of the European markets in the new year.
It’s indeed déjà vu as a fresh round of worry over Greek political instability engulfs the Eurozone (EZU).
The Russian rate hike is a desperate move to stabilize the country’s financial system. Tight liquidity measures would likely squeeze Russian corporates.
In addition to the expected shift in the monetary regime, the rise in volatility is also being driven by more unease from overseas.
The coming reduced accommodative monetary policy, along with rising geopolitical tensions, is likely to spur volatility in 2015.
The turmoil in high yield bond markets has left more than 18% of junk bond issuers at distressed levels. Investors should avoid the scary junk bond segment.
The fracking revolution and the plunge in prices have rendered the Oil Peak premise false. So alternative fuel companies are being hurt by cheaper oil.
According to estimates by Barclays, the industry could save up to the tune of $10 billion in fuel costs, making airlines lower oil price winners.
A rising dollar has and will continue to put downward pressure on oil prices, causing trouble for the energy sector (XLE).
The US shale boom, increased production elsewhere, as well as OPEC’s decision to maintain output are reasons for the current excess oil supply.
With China in a less oil-intensive stage of development, the demand for oil could stay low for a while.
The drop in oil prices is affecting the global equity markets (QWLD). The S&P 500 (SPY) also declined by 3.5%, the worst weekly decline in two years.
The immediate impact of Greece’s political crisis is evident in the capital markets, which have become jittery since Antonis Samaras called for snap presidential elections.