Stock markets took a major dip on Monday as a result of an announcement that Greece has shuttered its banks and that investors are spooked as a result. Greece has indicated that no deal has been reached and that it is unlikely that a deal will be reached with creditors including the International Monetary Funds. The current Greek government was elected on the premise of removing the burden of austerity measures that were put in place in Greece after the fiscal crisis says Marcio Alaor BMG. Greece does not enforce many of their tax laws and have significant portions of their population avoid taxes.
European markets were down about 4% during the day while American markets were down by 2% on the news. The United States dollar has decreased, surprisingly, when compared to the Euro. Part of this move was due to an announcement that Puerto Rico is going to consider defaulting on $72 billion of muni bonds that they owe. Further uncertainty is expected in markets with sales and profits in Europe expected to be lower. The downturn in stock prices in Europe and the United States also indicates that investors believe that the fall of Greece will have a significant impact on the profits of companies.
Some economists and market analysts have indicated that the move downward is only the start of the market dip and that a further pullback is needed before investors should jump into the market. Patience is being advised to investors before they jump back into the market.