A so-called Grexit wouldn’t necessarily cause the U.S. stock market to fall.
On the contrary, the U.S. equity market might very well rally in the wake of a Greek exit from the European Monetary Union.
The nightmare scenario has a Grexit leading to the collapse of several other weak European economies, which, in turn, could precipitate a wholesale depression not just in Europe but around the world.
Consider the stock market’s performance following the four such crises prior to Europe’s. Those four were:
The 1994 Mexican peso devaluation and associated crisis
The Thai government debt crisis 1997, which led to the phrase “Asian contagion”
The Russian ruble devaluation in 1998, which led to the bankruptcy of U.S. hedge fund Long-Term Capital Management
The 2001 Argentinian government debt/currency crisis
The accompanying chart plots two data series. The first represents the stock market’s performance since the European debt crisis first erupted 5-plus years ago — in November 2009 — and the second is an average of how the market reacted following those four prior cases. For both series, 100 represents the stock market’s level when those crises first broke out on the world financial scene.
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.