Investors must brace themselves for six months of ‘Greek-led volatility’

Investors are being warned to expect “Greek-led volatility” for six months, by a leading global analyst at one of the world’s largest independent financial advisory organisations.

Tom Elliott, International Investment Strategist at deVere Group, which has $10bn under advice from 80,000 clients, makes his observations following yesterday’s elections. Anti-austerity party Syriza has emerged as the victor and has agreed to form a government with the rightwing anti-bailout Independent Greeks.

Mr Elliott comments: “Investors can expect Greek-led market volatility for at least six months until a Syriza-led government is better understood.

“The Euro will weaken – perhaps to parity with the dollar – over the next six months as investors seek ‘safe havens’ as other populist parties in the Eurozone are likely to rise in the opinion polls and echo Syriza with their demands to end austerity.

“The sliding Euro will further boost exporters who got a leg-up from last week’s shock and awe quantitative easing package unveiled by the ECB.

“Indeed, one of the ironies of the Euro crisis is that the more that Greece looks likely to cause problems for the single currency, the more Germany and the core economies benefit from resulting Euro weakness.”

He adds: “Despite Europe’s main share markets rising – after initial falls – and the Euro recovering somewhat today, the announcement that Prime Minister-elect Alexis Tsipras’s main coalition partner is the centre-right Greek Independents will generate more uncertainty, leading to more market turbulence. This is largely because the move will hinder Syriza’s negotiations with the Troika and, I suspect, hinder reform.

“I’d give it a 30 per cent chance that Tspiras is the new Lula da Silva, the leftwing modernizer of Brazil, with investors actually supporting the government after a rocky start; 40 per cent that it turns into a problem-ducking coalition government that doesn’t address long term structural problems but investors stick with it; and a 30 per cent chance that the coalition initiates some sort of socialist revolution.”

Mr Elliott concludes: “It is early days and the story is just beginning. However, what history teaches us is that what is happening in Greece politically will have far-reaching effects on the capital markets and will impact investor returns.

“The changing political landscape in Greece, and across Europe, is presenting numerous risks and opportunities for investors globally. As such, the shifting dynamics must be monitored carefully to be able to benefit from these opportunities and to mitigate the avoidable risks.

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