Three Big Events Coming In The Next Two Weeks

June 14, 2012

Everyone knows we have lots of headwinds facing the U.S. and the global economies over the course of this year. But, I wanted to comment on three events that could move the markets in the next two weeks.


First is the Greek election on Sunday, the 17th.

The conventional story is that if the far left party, headed by SYRIZA, wins, he will negate the "Memorandum of Understanding" that the Greeks made with the EU in order to get their latest bailout money. If that happens, many feel that Greece would have to voluntarily leave the Euro and go back to their old currency which would be very painful in the short term or the EU would have a reason expel Greece from the Euro. The election is too close to call.

From everything I can find it looks like SYRIZA may modify his view to one of re-negotiation rather than simply tearing up the Memorandum. One reason is that a survey says 80% if Greeks want to stay with the Euro; they just don't want the severe austerity that goes with the agreement. Also, Spain just received a promise of a bailout package without the severe austerity demands placed on Greece. Also, a large number of SYRIZA's supporters are government workers and want to keep getting paid.
Therefore, on Monday morning, the S&P500 could open up much higher or much, much lower. And this is not to mention Egypt with the military decree that the last election was illegal.
Second is the decision of the Federal Reserve on Wednesday, the 20th

The country is disproportionally divided on whether the government should inject more money into the system. Keynesians are demanding additional government spending and money printing. Keynesian-Lite's are demanding tax cuts and defense spending paid for with borrowed money. Net, more spending and more printing of money.

The markets appear to be waiting for the Fed announcement which they believe will be for more printing or QE3. Or at the least, more "Operation Twist" for a few months with QE3 coming soon. If the Fed says they are standing pat, it could disappoint. If the Fed's goal is to keep markets stable or prices stable, they need inflation (QE3 which is money going into banks so they can drive up asset prices) to offset the deflation going on in depressed industries.

Therefore, we could have a much higher market or a much lower market on Wednesday.

Third is the Supreme Court Decision on ObamaCare

The Supreme Court usually announces decisions on Monday's in June before they recess for the summer. This means next Monday or the following Monday. The two big issues I think are the mandate that everyone is required to buy health insurance or pay a fine/tax; and if the court will through out the entire 2,000 some page law altogether.

The result will move the market either way.