Investment Newsletter - July 2015

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Investment Newsletter July 2015

A Broken Record Mike Deverell Investment Manager

In recent newsletters we have been emphasizing the need for caution. Events of the past few weeks illustrate just why we have been doing so!

writing (morning of 13 July) the deal needs ratifying by the Greek and other European parliaments and is far from secure.

When I first sat down to write this the FTSE 100 was at 6,473 (morning of 8 July) having hit a record high of 7,103 on 27 April. That’s a drop of almost 9% in price terms.

So what would the potential impact of Greek default and banking collapse be? On the positive side Greece is only 2% of Europe’s GDP and it is only the 45th largest economy in the world.

Other markets have dropped too, most notably those in Europe. For example Germany’s main Dax Performance Index is down 13.4% from its peak on 10 April (to 8 July). The recurring Greek crisis has become a bit of a broken record and I’m sure you’re all sick of hearing about it by now, but the potential for a default is one of the main reasons for the slide in stocks. Over the weekend there has been an agreement in principal between Greece and its creditors, meaning the markets have rebounded. There was no celebratory plate smashing in Athens however, with the deal far from popular in Greece. At the time of

However, that’s not to say default would not have an impact, especially in Europe. For example, Greece owes Germany directly around 15bn Euros. If that disappeared that would hurt the German balance sheet but given their GDP is around 2,143 bn Euros it would be more than manageable. However, Greece also owes money to organisations like the European Financial Stability fund, European Stability Mechanism and the European Central Bank (ECB) which all are ultimately owned by the member states of the

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Investment Newsletter - July 2015 by Equilibrium Financial Planning LLP - Issuu