Greece will likely be the market’s focus over the next month as Greece negotiates with its creditors.  Pieces of Greece’s €300 billion-plus debt are coming due within weeks.  Greece doesn’t have the money, and European finance ministers have agreed to a hard, May 11 deadline to reach a deal.

So far, it’s not looking good.  http://nyti.ms/1J2Syfs

Default or bailout, stay in the euro or leave, financial domino effect or no–these are the endgame questions the world will obsess about (again).  We don’t know what will happen, but it seems clear this round of negotiations will be tougher than the 2012 debt refinancing because of that deal’s disappointing results and Greece’s new leftist Syriza government that has vowed to refuse any more structural reforms or austerity measures.

A Greek default and a breakup of the euro are big deals even if highly anticipated or inevitable.  Deflation fears will flare up again as people realize Greece’s problems are not unique:  the world is swimming in debt–a fact that has actually grown worse since the financial crisis (a “teachable moment” the 2008 crisis was not).  Fear is probably the real impact of Greece, not the debt or breakup itself.  Greece accounts for just over 2% of the population of the European Union, and the EU debt stands at €12.5 trillion.

What ever the endgame, the European Central Bank’s printing press will continue to print money and the ECB will buy more debt.  That seems the only certainty.

We think it’s prudent to assume more volatility and therefore think more defensively.  But not too defensively as volatility also serves up attractive bargains.