I believe in ripping off the band-aid quickly, so I’ll get to the bad news first: Today, the major indices posted their largest dip in three months. What spooked investors were last-minute jitters about whether the Greek bond swap would actually pan out. Basically, Greece has until Thursday to complete its debt restructuring plan, and there are questions about whether enough firms will participate in the program. As it stands, about three-quarters of private Greek bond holders need to agree to the plan. If Greece can’t pull this together, they risk losing the second bailout and going down the path of default.
Interestingly enough, problems in the Eurozone sparked a reversal in a number of trends:
- The euro fell to $1.311, a three-week low.
- The dollar, which has been losing ground against many major currencies, rose against the euro, the Swiss franc, the Brazilian real, the South Korean won and the Canadian dollar.
- The stronger dollar helped end a 27-day-streak in gas prices; the nationwide average for regular gas slipped to $3.764 per galloon. U.S. crude oil futures also slipped 2%.
- The stronger dollar also enticed investors away from gold; gold futures dipped below $1,700, the first time in several weeks.
I’d like to emphasize that the dollar’s gain should be temporary. Like I mentioned last week, there are powerful forces at work that are keeping the dollar down. So, while some investors may find solace in cashing out, this will only provide temporary relief. In the long run, the best way you can profit from this trend is to invest in commodity-based equities.
All in all, I’m not overly concerned with today’s drop. The Dow is still trading about 4.5% above its 2012 open, and Greek drama can only distract investors for so long. In any event, we’ll find out how the Greek bond swap deal pans out on Thursday. My advice is to stay away from financials while they work this mess out and stick to high-dividend-yielding stocks with limited exposure to Greece. As always, a fantastic place to start is by running stocks through my Portfolio Grader tool.
I’ll be in touch if there are any other major developments on the Greek front. And, if you’ve been just hankering to take a bite out of Apple Inc. (AAPL), be sure to check back in tomorrow–the company has a press conference scheduled for 1:00 p.m. ET tomorrow and many expect this could bring details of iPad 3. Either way, I’ll be in touch with the latest from the tech giant tomorrow.