Equity review: More Greece pretending?

The markets rebounded strongly from an uplift in sentiment as central banks pledged to swamp the markets with liquidity should the Greek elections ‘disappoint’ investors.  But the Greek elections did not disappoint, with the New Democracy party becoming the largest and insuring a larger coalition. Only time will tell if this will be meaningful, even for Greece, or if we will see a continuation of the long saga towards default and a Euro exit. The situation will most likely not last forever as Syriza has made it clear that it is simply waiting for the coalition to break down to change Greece’s course. This has the potential to create a sour mood in the market and investors shouldn’t get their hopes too high as markets have been in a volatile holding pattern with no end in sight.

The Greek stock market rally of 15% last week demonstrated the great uncertainty in the value of Greek assets.

Earnings for Q2 are now coming in, and stable reports and credible outlooks might provide further uplift and strengthen this mini-rally. Should the rally continue, certain cyclicals such as mining, energy and banking should lead the way.