US stocks have started the week firmly in the red.
It’s the first big reaction to the bad news from Greece over the weekend, as it heads into a missed payment to the IMF on Tuesday, and implements capital controls all week long.
As stocks sell off, there’s the question of how all of this may affect the bull market.
Fundstrat’s Tom Lee says the impact is not a “thesis changer.”
There will be pain over the next few weeks, he says, but the gist of a note to clients on Monday is that everyone can rest assured that the Greek crisis will not derail stocks.
Here’s why, according to Lee:
- Most of Greece’s debt is held by the Euro-area government, and “the world is better prepared for Grexit today.” The so-called bank run, where many customers are yanking their cash at the same time, exists only within Greece.
- It’s possible that there’s some huge hedge fund out there that is significantly exposed to Greek markets, and so stands at risk. However, the consensus is that Greece is not a great place to be invested in right now, and that’s more likely what rings true.
- The European Central Bank would adjust its quantitative easing program to cope with the crisis in Greece. The Fed would also provide support, if it has to come to that.
- If investors decide to pile into safer assets in a risk-off’ trade, it just improves the risk/reward profile for stocks. At the end of the day, the trend for stocks into the end of 2015 is up — consumers are spending again, and the impact of lower oil prices and a stronger dollar are fading.
And so, according to Lee, any turbulence in stocks over the next few weeks serves as a buying opportunity.
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