Kevin Cook here for Steve…
When I wrote a few days ago that everyone (including People magazine) wanted the communist leaders in Greece to “just go already,” I didn’t think one would resign on Monday morning. But maybe the powers that be in Athens are getting wise to the real consequences of not accepting the help being offered by the Troika (EU, ECB, & IMF).
Whatever happens in that never-ending drama, one thing is becoming clear for US markets: we can handle the potential contagion of Grexit. Even though the S&P is below 2070, an important support level since April, it did not take out last Monday’s and Tuesday’s low at 2056.
And the VIX remains relatively quiet below 20, indicating large players are not expecting any daily down moves much greater than 1%.
So we wait. For what? For earnings season, of course! Yesterday, we talked about the economic underpinnings of a strong second half. Now we want to see the company report cards for Q2 and hear from the CEOs about their outlooks for Q3 and beyond.
Bottom line: The slow-motion tragedy of Grexit will unfortunately rule the headlines for another few weeks. But any sizable market dips should be solid buying opportunities in strong stocks as we head into the thick of earnings more dependent on a stable European core than an unstable, profligate defaulter.
Senior Stock Strategist, Zacks Investment Research