From Teeka Tiwari, editor, Mega Trends Investing: These questions have world markets in jitters:
Will the European Union (EU) cave and continue to lend money to Greece? Or will it kick Greece out of the EU? Will Greece default and return to its old currency, the drachma, or will its government blink? (Spoiler alert: The EU and Greece just announced a bailout agreement as we go to press. Greece stays in the EU and euro… for now.)
How should we respond? Relax.
As regular Mega Trends Investing (MTI) readers know, we only pick stocks that are cheap, possess a competitive moat, and have the tail wind of a huge trend. Those traits will help our positions weather Greece, or any other storm.
Of course, in the short term, we might see more weakness in the S&P 500. That could give us some great buying opportunities.
But first, let me calm any fears you might have about Greece…
American economic growth will not be impeded by events in Greece.
That’s because American economic news is improving—even skeptics can’t argue the numbers.
U.S. manufacturing data for June beat expectations. It posted the fastest growth in manufacturing in five months. The ISM numbers came in at 56% vs. an expected 55% (all numbers above 50 indicate economic expansion). May construction spending also beat expectations. It showed 0.8% growth (compared to an expected 0.5%).
With an improving U.S. economy, you must view any pullback in the market as a buying opportunity.
At the time of this writing, the S&P is at 2,077. I would not be shocked if we saw a drop to 1,980. That drop would lower the forward price-to-earnings ratio (P/E) of the S&P 500 to about 16.50.
At that price, buyers will rush in… and you should, too. A lot of strong companies will trade at great values at that level. And they all sit atop a U.S. economy that continues to grind higher.
If we do see a drop in the S&P, take it in stride. Any further weakness would merely give us a better entry price on all open MTI positions.
Bottom line: Stay ready. If the markets do panic and pull back, get ready to snatch up some extraordinary values.