All is well with Europe, as the pro-euro and accepting of austerity Greek political party, New Democracy, garnered the majority of the second vote. Danger has been averted, so now Greece and Europe can return to the service of the devil we all know. The bounty of this victory is the same economic distress Europe was dealing with a month and a half ago that, while better than what might have been today, still stinks.
After a short burst for stocks on the win of the lesser devil, the SPDR S&P 500 (SPY) was down fractionally in early morning trade; the PowerShares QQQ (QQQ) and SPDR Dow Jones Industrial Average (DIA) were mixed, reflecting market indecision. Spanish bond yields stuck stubbornly higher as investors took note of how close we stand to the abyss. Europe has turned downward into the morning, with the iShares S&P Europe 350 Index (IEV) and the Vanguard MSCI Europe ETF (VGK) down 1% and 0.6%, respectively, at this hour. Poor Asian traders were lured into celebration by Sunday's newswire, only to be trapped deep into the green by the close. The Nikkei 225 and Hang Seng closed higher by 1.8% and 1.0%, respectively. However, Asian tied securities trading in the States are reflecting a different likely open for Asia Tuesday, with the iShares MSCI All Country Asia ex-Japan (AAXJ) trading shyly down fractionally.
The big foreign-based international banks probably best reflect the election result market driver, and the shares of those and a U.S. representative here are decidedly lower:
Deutsche Bank (DB)
Banco Santander (STD)
Credit Agricole (Paris: ACA.PA)
Societe Generale (Paris: GLE.PA)
ING Group (ING)
National Bank of Greece (NBG)
So What to Do Now?
Last week, I suggested investors look to a rally as I expected the PIIGS to escape slaughter. In the process, I also contemplated this market reflection of reality. The market is selfish, with a "what have you done for me lately?" mentality. So, as investors reflect on the still deteriorating economic situation in Europe and the deeply flawed focus on austerity, initiated at precisely the wrong moment, opportunities for capital gain are limited. What it means for us traders scraping for profit is the end of the election-tied long trade. Close it out if you haven't yet, or get caught with a bag of worms. Let me reiterate, though, that for the long term I still see a deteriorating global political and economic situation.