Thoughts [07.13.15}

Markets have opened up about 3/4s of a percent in the US on news of a Greek deal in the wee hours of the morning.  Apparently it was a near won thing.  The talks almost collapsed at the last minute with both the Greek and German Prime Ministers prepared to leave the room, ready for a Greek exit from the Euro.  Apparently the European Council President,  Donald Tusk said "Sorry but there is no way you are leaving this room".  That set the stage for a deal.  Apparently the agreement, which sounds worse for the Greeks than the one they could have had a week or so ago, have to get this through their Parlement, so we can't quite put this to bed quite yet. If it passes then we can start to focus on other matters like corporate earnings here at home.

Speaking of those earnings....so far it has been a positive.  Few companies have reported so far. Those that have reported have had nothing to say that makes me think the economic situation has changed for the worse.  We will start to get a better read on this as the week goes on.  Current forward estimates show the S&P 500 trading with a mid-16's PE and an earnings yield over 6%.  

Probability suggests that if we get Greece behind us then we have the potential for a rally going forward.  I suppose you could say we've actually been in that mode since last week, yet by my work we've never really had much of a sell-off.  I know you can argue that we've seen that in the individual stocks and in foreign ETFs, but US indices never really became undone.  Probability suggest we could now see a move back to this year's highs in the US.  From there though the crystal ball becomes a bit more cloudy and the potential for headwinds into early autumn still exists.

Finally changing gears, Dr. Ed. Yardeni thinks we'll see one interest rate rise this year.  I think that's likely baked into markets at this point and investors will be looking to see what the Fed might be up to in 2016.  That is will one increase be enough or are we in for a series of raises at each Federal Reserve meeting in 2016.

Back Wednesday.