Two Strategists Still See Grexit Possible (or Likely)

Greece has reached a deal that will allow it to remain in the euro currency. Or has it? A lot of this depends upon which set of headlines you read and who is making the forecast.

24/7 Wall St. read two accounts on how to view Greece ahead. One was from Credit Suisse and the second was from Stifel Nicolaus. Alexis Tsipras, Prime Minister of Greece, has also keyed in on Greek national TV and we used some of the standout comments.

Credit Suisse’s Andrew Garthwaite said:

Despite the agreement, we would continue to place a 30% probability of a Grexit over the next year. We believe Continental European equities have experienced most of their Greece-related rally. Long term, we stick to the overweight of Continental Europe. European markets, are, we believe pricing in GDP growth of just 0.8% (compared to consensus GDP growth this year of 1.5%). We believe that European markets should on measures of normalized earnings be trading on an 8% premium to the US compared to the same multiple now.

Stifel’s Lindsey Piegza said:

While a framework of any kind for an agreement between Greece and her creditors is a welcome step in the right direction, there remain a number of sizable hurdles that Athens must clear before specific negotiations with creditors can begin.  In other words, there are hopes of a clearing ahead, but we are not out of the woods yet.

By Wednesday, the Greek government must pass six “sweeping” laws to trigger a vote by EU parliaments ahead of Thursday’s ECB meeting.  By Monday, then, Greek leaders will be required to pass additional laws all aimed at increasing the integrity of the commitment from the debt-stricken nation to seriously, and honestly impose far reaching reforms on pensions and taxes and labor markets.

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The latest Dow Jones headline coming from Prime Minister Tsipras on national television in Greece also may coincide — Greek Prime Min Can’t Rule Out Euro Exit With Certainty Until New Bailout Is Signed… Greece Did Whatever It Could To Get Best Possible Bailout…

The long and short of the matter is that Greece dominated the headlines up until Monday. That may not yet be over after all.

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