Investors on global stock markets were in ‘risk off’ mode today, as a failure to form a coalition government in Greece eroded confidence.
Shares in banks were hit the hardest, as investors fear their exposure to European sovereign debt.
The FTSE 100 index of leading UK company shares closed down 2% lower, with worse performances in Germany, Spain and France.
This current Greek tragedy is nothing new.
Investor sentiment is driving stock market performance despite full knowledge for many months that the Greek people are resolutely against austerity measures.
Rather than unwind the eurozone sovereign debt crisis in an orderly fashion, politicians have instead chosen to defer the problems. Perhaps this is due to a recognition that the exit of Greece from the euro is simply too expensive.
Of course this is not all about Greece.
The current political uncertainty in Greece has coincided with a general slow down in the process of global economic recovery. Oil has fallen quite sharply in value as a result, with Brent crude falling from $128 a barrel in March to $110 today.
Investors who are prepared to take a long-term view could benefit from this period of negative investor sentiment.
Whilst we do not advocate any attempt to time markets, there appears to be good value in many of the global stock markets at current levels. The FTSE 100 in particular is trading well below its historic long-term valuation levels.
Photo credit: Flickr/Marco Garro
