Stock Watchers See News as Bullish for Markets
06/17/2012| 06:20pm US/Eastern
--Outcome of Greek election likely to ease U.S. investors' fears
--'This is pretty positive,' says one strategist
--Caution about challenges still in store
By Matt Jarzemsky
NEW YORK--Stock strategists voiced optimism about where markets might be headed Monday, after Greece's pro-bailout party notched a slim victory at the polls.
The outcome was set to ease U.S. investors' fears of an imminent departure by Greece from the euro zone or a protracted political standoff that might have triggered a selloff in stocks.
"This is pretty positive," said Quincy Crosby, market strategist at Prudential Financial. "This is what the market wants to hear. The market doesn't want to hear that they're going to have another election and we'll have another period of limbo."
Some cautioned that Sunday's events were just part of a larger process with more challenges in store.
"This is the first act in a many-act play," said Jim McDonald, chief investment strategist at Northern Trust in Chicago. "It's going to be a good resolution of this first act. But now what we're going to do is get to the actual negotiations around the whole austerity plan."
The victory by Greece's New Democracy party left open questions as to whether the party would be able to lead the formation of a government. Ten days of talks after an inconclusive Greek election on May 6 failed to produce a government, forcing Sunday's second round.
Greece's political leadership will face immense challenges, such as a beleaguered economy, a cash crunch and a populace already exhausted by austerity measures.
In addition, questions remain beyond Greece's borders, such as how debt issues plaguing other countries will be addressed, and how far central bankers may go to provide assistance.
"Are they preparing bigger, broader liquidity measures at the [European Central Bank]?" said George Greig, a principal at William Blair & Co., an investment-banking and asset-management firm. "Is this catalyzing some other kind of policy responses, in terms of entertaining new ideas, in terms of rescue mechanisms or leverage for the rescue mechanisms, or support for the banking systems?"
"The planning process is probably farther along than we think," said Mr. Greig, portfolio manager of the firm's International Growth Fund. "On that basis, I'm pretty optimistic."
Adding to the uncertainty markets face this week, the U.S. Federal Open Market Committee is set to meet Tuesday and Wednesday, leaving open the possibility that additional efforts to support the U.S. economy could be on tap.
"I think the Fed is going to step up going forward, but I think the incremental benefit from further Fed stimulus will decrease," said Alan Gayle, senior investment strategist at Ridgeworth Investments. "This is a market that is very hyped up on low volume and is very susceptible to disappointment."
Write to Matt Jarzemsky at email@example.com.