Henrik Drusebjerg answers questions relating to the financial turmoil
The turmoil in the financial markets has intensified due to uncertainties surrounding Greece’s EMU membership. Henrik Drusebjerg, senior strategist at Nordea, expects the uncertainties to persist and provides answers to some of the frequetly asked questions.
How likely is it that Greece will have to exit the euro?
The probability has risen after the Greek election to about 50 per cent, according to some surveys. Right now Greece is in a state of political chaos, awaiting yet another election. But it will be very difficult to ensure backing of the pledges that the former government gave to the EU, IMF and ECB. Several EMU countries, and recently the ECB, have made it clear that there is no alternative and that Greece will have to exit the euro if current agreements are not honoured.
What will the implications be for the financial markets?
As long as the parliamentary situation in Greece is unclear, and in turn the country’s EMU membership, risky assets such as shares and certain corporate bonds will remain under pressure. True to tradition, investors will favour what they perceive as safe-haven assets: US, German and even Danish government bonds and currencies such as the USD and CHF.
What should you do as an investor?
At the moment risk diversification is more important than ever – so hold on to your shares despite these worries. Given the historically low interest rate level, conventional government bonds and mortgage bonds will yield very limited returns in the future, so we also recommend investing part of your savings in corporate bonds.