Focus: Eurozone The MacroReport: Focus–Eurozone issue, published March 7, 2012, considered the effect on the U.S. and global economies of the Eurozone sovereign debt crisis and the volatile environment created by the saber-rattling among the U.S., the EU, and Iran. Broadly speaking, the possible outcomes of the Eurozone crises may be categorized as: (1) No Greek Default, (2) Orderly Greek Default (3) Disorderly Greek Default, and (4) War with Iran. These economic scenarios were constructed by considering changes in each of the driving MacroRisk Factors, as shown in the "Eurozone Scenario Box." The 18 MacroRisk Factors, developed by MacroRisk Analytics, generally explain over 90% of the variance of most ETFs, stocks, funds, and indexes. For this report, we focused on the Dollar/Euro Exchange Rate, the Gold Price Index, the FTSE 100, Euro Yield Curves, and an Energy Price Index.

Download Report Eurozone: Comparing Scenarios Eurozone: Optimized ETFs QuickResponse™ Portfolios InterActive: Home

Eurozone Scenario Box
SCENARIO	DOLLAR/EURO	GOLD	FTSE, OTHERS	YIELD CURVE			EQUITY MARKETS	ENERGY INDEX
			Ezone Recession	Ezone Bond Yields	Ezone Bank Liquidity Problems KEBITR	Credit Tightens	Volatility VIX, GVDAXX	Higher Energy (Iran) PCIUFMFU
No Greek Default	dollar falls	falls	decreases	yields fall	yields fall	yields fall	VIX falls	rises
Orderly Greek Default	no change	no change	no change	yields soar	yields soar	yields soar	VIX rises	no change
Disorderly Greek Default	dollar rises	falls	increases	yields soar	yields soar	yields soar	VIX soar	falls
Iran War	no change	falls	increases	yields rise	yields rise	yields rise	VIX rises sharply	rises sharply
Source: MacroRisk Analytics

In addition, we considered movements in certain indexes:

1. Movements in the Eurozone Large-Cap Bank Returns Index (KEBITR), due to the potential impact on larger European banks from a Greek default or Iran war;
2. Movements in the DAX Volatility Index (DAX), used to reflect general concern in the German economy as a proxy for "healthy Europe";
3. Movements in the CBOE Market Volatility Index (VIX), reflecting uncertainty in the U.S. market; and
4. In the instance of an Iran war, movements in the Private Transportation Motor Fuel Cost Index (PCIUMFU), a U.S. index, to proxy the impact of disruptions to the world petroleum supply.

(To see citations for several academic articles that employ the MacroRisk Analytics technology, go to Academic Citations.)

These changes were then analyzed in terms of their impact on the Indexes and ETFs that are being analyzed in this report.

Here's a comparison of the current economic conditions for these four scenarios with the conditions that existed at the time of the report's publication (March 7, 2012). Here also are updates of the Optimized ETF Portfolios and our QuickResponse Stock Portfolios.



The MacroReport is co-published by Sabrient Systems and MacroRisk Analytics.