After a number of surprising twists, the recent Greek drama finally took an expected turn Monday, with news that Greece and its creditors struck a tentative deal – $96 billion in aid from Eurozone leaders in exchange for tough austerity measures – that would seemingly avoid a Greek exit from the euro currency.
While markets cheered the deal, uncertainty remains. The deal contains several onerous provisions and reforms that still need to be approved by the Greek Parliament and then implemented.
But regardless of what happens next, it’s important to put events in Greece in context: Despite all the recent drama and late-night summits between Greece and its creditors, the global economy and markets aren’t too far off the trajectory they were on in early 2015.
As I write in my new weekly commentary, “Rough Patch Does Little to Alter Big Picture,” turmoil overseas hasn’t changed the underlying fundamentals that have shaped markets for some time now: slow but steady growth, low interest rates, low inflation, a strong dollar and a Federal Reserve (Fed) that is likely to start raising rates by year’s end.
Meanwhile, volatility is still trending upward, U.S. stocks are trading flat to slightly higher, cheaper equity markets outside the U.S. are doing well, bond prices remain modestly lower and commodities continue to struggle. Indeed, it’s worth noting that even when a Greek exit looked most certain last week, bond markets in Italy, Spain and Portugal suffered only modest losses.
In this environment, there are a couple of themes that are likely to dominate the second half of the year.