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January 23, 2015

“Déjà Vu, All Over Again”

Greece is back in the headlines. Do troubles in Russia and a collapsing ruble remind you of 1998 or does a Saudi Arabian led oil price war look like the 1980’s all over again?

Because we’ve seen this before, the market isn’t over reacting. But throw in a few other uncertainties such as a change in the Federal Reserve’s monetary policy, the effectiveness of the European Central Bank’s renewed monetary stimulation and potential deflation in Europe, and you have enough uncertainties to give investors pause and potentially impair the market valuation, the best gauge of investor sentiment. This is especially true when you include some contagion risk that adds the potential for any of these issues to metastasize into something more problematic.