Greek Elections Could Herald Market Bottom: Strategist
The fiercely-contested elections in Greece could signal a bottom in equity markets, if the new government can “play by the rules” with international creditors, according to Daniel Morris, market strategist, JP Morgan Chase.
“If we can get past the election there could be a bottom for the markets, if not necessarily a huge rally,” he told CNBC’s “Squawk Box Europe” on Thursday.
European equity markets tanked in May, but have staged a slight recovery this week after renewed hope that euro zone officials would come up with a further solution to the debt crisis.
“Except from the risk from Greece, equities are attractive,” Morris said.
“Retail investors are still taking money out of equities and putting it into fixed income, often into high-yield. That’s unusual and won’t turn around until people believe in the long-term rally of equities.”
Plenty of strategists have already called the bottom of the market during this crisis and been proved wrong. Peter Oppenheimer, chief global equities strategist at Goldman Sachs, said that equities were offering the best opportunity in two decades in March – only to see equity markets in the U.S. and Europe fall again.
“We’d like to have a little more confidence before going back into risk assets,” Morris said.
The rise of anti-bailout Syriza in the polls has helped unsettle markets recently. Former Greek finance minister Stefanos Manos warned CNBC that a protest vote for Syriza could lead to “impoverishment” for the country.
A member of another anti-bailout party, far-right Golden Dawn, attacked two women on Greek TV Thursday during a debate about the election.
Greece may be able to secure more much-needed aid for its economic problems if a government which is amenable to the conditions of the bailout is elected, Morris argued.
“There’s no question Greece is going to need more aid but if they’re playing by the rules there’ll be more willingness to accommodate that,” he said.
“The programs in place so far are broadly speaking workable. The question is confidence. It is a path that they can follow which will eventually put them closer to fiscal balance, but it’s not going to happen no matter what.”