Greek elections on Sunday kicked off two potentially tumultuous weeks in the European debt crisis. Once the two weeks are behind them, investors still face a stretch of slow — or no — growth in the global economy that could last for years.
Market momentum has evaporated in recent weeks, causing many investors to recall last summer’s alarming dives when the debt-ceiling stalemate in Washington took hundreds of points off the Dow Jones industrial average.
Concern over a widening of the European crisis only heightened last week as Italy and Spain saw their borrowing costs surge. There’s even been some uneasy chatter among investors about whether the potential exists for “another Lehman Brothers” — a reprise of the financial firm’s collapse at the heart of the 2008 financial crisis, with Greece playing the role of Lehman, perhaps to be joined later by Italy and Spain.
The risk of Lehman II appeared to lessen on Sunday, when parties that support the terms of Greece’s bailout agreement won enough votes to form a coalition government.
But average investors are still asking: What should I do to protect myself?
The standard advice is to avoid doing anything rash, such as suddenly pulling your money out of stocks to guard against a worst-case scenario. For long-term investors, reacting to headlines is rarely the right move.
The risk of a Greek exit from the euro is off the table, at least for now. But any rally in stocks should be short-lived, analysts warned on Sunday.
Among the reasons; there is still no long-term solution to the European debt crisis.