Why US market is falling due to Greece crisis?

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rambalachandran
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Why US market is falling due to Greece crisis?

Post by rambalachandran »

I'm kind of curious to learn why US markets are falling due to Greece - Eurozone crisis. US had almost no exposure to Greece bonds and the fear of Grexit and the future of Euro has made the investors to pull out of the European market. But their investments must go somewhere right? Ideally, they could try to invest in US markets, since the macroeconomic indicators of US has been reasonably stable this year. But instead, I see the US markets are also falling? Why is this the case and where is the money pulled out of Eurozone is getting invested?
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Noobvestor
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Re: Why US market is falling due to Greece crisis?

Post by Noobvestor »

Global markets tend to be much more correlated than not. You can see this in any of the last few major crises, regardless of their points of origin. Global diversification is helpful for long-term investing (i.e. dispersion of returns, hedging against long-term, single-market stagnation, currency diversification, etc...), not so much for short-term crisis management.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
livesoft
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Re: Why US market is falling due to Greece crisis?

Post by livesoft »

One has no idea what the US exposure to the Greece crisis is. There could be hedges and credit default swaps and other derivatives. The IMF is exposed and I believe the IMF is funded in some large way by the US.

A significant fraction of the Greek diaspora lives in the US, too. They may be sending money to their relatives and friends in Greece. They may get that money from selling their investments.

I think it's complicated and nobody knows nothing.
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moshe
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Re: Why US market is falling due to Greece crisis?

Post by moshe »

Fear or irrational exuberance. One or the other moves markets short term. Greece leaves the EuroZone so maybe Spain, Portugal and Italy decide to do it also...

Invest and check back in 30 years.

~Moshe
Last edited by moshe on Tue Jul 07, 2015 4:23 pm, edited 2 times in total.
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Twins Fan
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Re: Why US market is falling due to Greece crisis?

Post by Twins Fan »

What's falling? The S&P 500 went back up to 2081 today. Just moving around as it has all year. Tune out the noise.
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cfs
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Re: Why US market is falling due to Greece crisis?

Post by cfs »

Welcome aboard.

Welcome aboard to rambalachandran. Your first post. Keep your questions coming. And as far as why the US markets are falling due to the crisis in Greece, we are living in a global economy and the fear is on the domino effect--Greece now, then Spain, then Ireland, then Portugal, then Italy . . . well, you get the message. The only thing "we the little guys" can do is to invest slowly and for the long run and disregard all the market noise.

Again, welcome aboard.
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greg24
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Re: Why US market is falling due to Greece crisis?

Post by greg24 »

Markets go up, markets go down. Humans attempt to find a reason in random variation.
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telemark
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Re: Why US market is falling due to Greece crisis?

Post by telemark »

  • Ever notice that when a car in the right lane slows down to turn off the highway, the cars in the adjacent lane will slow down too, even though it makes no sense? Behavior doesn't have to be rational and usually isn't.
  • An efficient market has correctly priced the chances of contagion, using the best available information. Yeah, that's the ticket...
  • How do we know it's Greece? Maybe the market is reacting to China instead.
Pick as many as you like, or none at all :)
dc81584
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Re: Why US market is falling due to Greece crisis?

Post by dc81584 »

Twins Fan wrote:What's falling? The S&P 500 went back up to 2081 today. Just moving around as it has all year. Tune out the noise.
Precisely. This Greece debacle is nothing compared to China.
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Taylor Larimore
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Are US markets falling?

Post by Taylor Larimore »

rambalachandran:

Welcome to the Bogleheads Forum!
rambalachandran wrote:I'm kind of curious to learn why US markets are falling due to Greece -
I'm not sure the US markets are falling. Vanguard's Total Market Index Fund (VTSMX) is UP +2% year-to-date. It is also helpful to know that Greece is only 0.01% of Vanguard's Total International Index Fund (VGTSX) which is UP over 4% so far this year.

We get what the market gives.

Best wishes.
Taylor
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AAA
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Re: Why US market is falling due to Greece crisis?

Post by AAA »

I have to laugh each day when I read the headline in the financial section of my local newspaper. One day it's something like "Market down due to worries about Greece." The next day, if the market went up, it's "Investors shrug off Greece problems."

They always have to come up with an explanation for what the market did.
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ruralavalon
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Re: Why US market is falling due to Greece crisis?

Post by ruralavalon »

rambalachandran wrote:I'm kind of curious to learn why US markets are falling due to Greece - Eurozone crisis.
Is the U.S. market falling due to China's biggest stock market rout since the 1990's?

Is the U.S. market really falling? It's up today.

I sure don't know.
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TooLateSmart
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Re: Why US market is falling due to Greece crisis?

Post by TooLateSmart »

AAA wrote:I have to laugh each day when I read the headline in the financial section of my local newspaper. One day it's something like "Market down due to worries about Greece." The next day, if the market went up, it's "Investors shrug off Greece problems."
They always have to come up with an explanation for what the market did.
That's bugged me for years now. The "investors" they're analyzing don't exist.

Here's a simplified scenario for what I think is really happening:

Monday:
At the GetRichQuick hedge fund, somebody selects ARandomStock and clicks on the ShortThis button. The computer short sells 100k shares, driving the price down a couple of points.
WSJ says "Investors worry about ARS future prospects"

Tuesday:
1000 day-traders turn their computers on and get a notification that ARandomStock closed below their watch limit. Hurrying so as not to be caught in the crash sure to come, they all sell their holdings, driving the price down 3 more points.
WSJ says "Investors fear looming US financial crisis"

Wednesday:
The GetRichQuick computer buys 200k shares, more than covering their short position. ARS closes up 5 points, where it started. WSJ says "Investors reassured by latest Supreme Court ruling"

Net Results:
GetRichQuick started the whole thing, and made $500k on the short shares plus $300k on the others.
The day-traders lost the $800k that GetRichQuick "earned".
The WSJ had no clue at all.
Levett
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Re: Why US market is falling due to Greece crisis?

Post by Levett »

Stop the blame game, please.

The naivete displayed is astounding.

Lev
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LadyGeek
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Re: Why US market is falling due to Greece crisis?

Post by LadyGeek »

rambalachandran, Welcome! Your question is quite reasonable, but one that's very difficult to answer because there's no consensus on why the market behaves as it does. It's not just Greece, as the market has a mind of its own lots of times and nobody knows why.

That being said, there is a considerable amount of debate on underlying causes. Economic policy, politics, you name it. Everyone has a different opinion, which often results in lots of disagreements. At this point a moderator steps in to keep the discussion civil. Like now.

This thread has run its course and is locked (economic policy). See: Board rules
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Comments on the Greece referendum (GrExit) and the impacts on investing can be posted in a factual manner here: The next Lehman - this week? [Greek default]

A concise summary on the impact of Greece on the world economy can be found here: Re: excellent summary of the Greek crisis by U of Chicago Professor (thread is locked)
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