<p>Beyond what some of the other answers and comments have mentioned, there are other psychological factors at play:</p>

<ul>
<li>Greece leaving the Euro sets a precedent for other countries such as Spain and Portugal who have had austerity measures in place. This could theoretically cascade in to many other countries also leaving the Euro which then adds some major turbulence to global economies.</li>
<li>More recently, there has also been another mini-correction in the price of oil with Brent falling below $60.</li>
<li>Heavy turbulence in the Chinese markets must also be considered.</li>
<li>Markets are trying to predict and factor in upcoming policy decisions by the Fed. Perhaps there is a reduced chance of a U.S. interest rate hike because of poor economic data.</li>
</ul>

CC BY-SA 3.0
2015-07-08T22:58:51.787Z
2015-07-08T22:58:51.787Z
karancan
<p>As dg99 mentioned the response has actually been relatively muted so far in the American markets  (SPX down 3% or so from its peak).  Generally, problems in major world equity markets cause cascading problems in their trading partners.  In this case there are many American companies that have European stores or otherwise sell into European markets that are affected by the turmoil.  There are secondary effects as well as companies that trade with affected companies feel the pain and so on.</p>

<p>As you mention the news out of the US has been fairly positive, but a melt down in the EU would likely overwhelm the tepid growth in the North American region.</p>

<p>The important thing to note here is that the investments do not necessarily need to go somewhere.  We can just all agree that the value of European investments is significantly less now because future earnings is likely lower (really for any reason) and <em>the price will change even if no one sells and no money leaves the region</em>.  In a very real sense billions of value just no longer exists.   However, it is true some people have been selling and investing elsewhere.  The main beneficiary is generally safer instruments like bonds which have rallied somewhat.</p>

CC BY-SA 3.0
2015-07-07T18:40:25.640Z
Thank you for the response. What makes this change interesting and surprising that Greece seems to be influencing the US markets more than the equity rout in China, since China is not just as big a market as Europe, but it will also affect the manufacturing costs of US companies.
rambalachandran
CC BY-SA 3.0
2015-07-07T19:27:05.653Z
@WanderingMind China's equity market crash is pretty self contained to china. It is the new speculators that got burned by the government's pump and dump.
CQM
CC BY-SA 3.0
2015-07-09T06:36:29.887Z
Investments *do* need to go somewhere - the stock price is the value that it **was last traded at** - if trading stops then the stock price does not change irrespective of the value of the underlying company. In a liquid market (like any stock exchange) this does not happen - trading occurs all the time and the stock price is always a reasonable proxy for the value of the company as perceived by the market.
Dale M
CC BY-SA 3.0
2015-07-09T07:35:31.843Z
@DaleM there may be a bit of confusion above as "go somewhere" in the op was generally referring to the money behind the investment rather than the price of the stock. Also, while it is true there would likely be a lot of trading in the situation it is not necessary for the loss of value.
rhaskett
CC BY-SA 3.0
2015-07-09T07:39:59.877Z
Maybe it would help to be careful with the *price* generally "the stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for" vs *last price*.  For instance, "reasonable proxy" is violated >16 hours every day when the markets are closed and can be violated rather dramatically in a crash.
rhaskett
CC BY-SA 3.0
2015-07-07T17:20:53.683Z
2015-07-07T17:20:53.683Z
rhaskett
<p>I'm kind of curious to learn why US markets are falling due to Greece - Eurozone crisis. US had almost no exposure to Greece bonds and the fear of Grexit and the future of Euro has made the investors to pull out of the European market. But their investments must go somewhere right? Ideally, they could try to invest in US markets, since the macroeconomic indicators of US has been reasonably stable this year. But instead, I see the US markets are also falling? Why is this the case and where is the money pulled out of Eurozone is getting invested? </p>

CC BY-SA 3.0
2015-07-07T15:25:43.303Z
True but the bond market is stuck in extremely low returns due to worldwide QE. Is there any data on which markets or securities/commodities could potentially be gaining at the loss of Eurozone.
rambalachandran
CC BY-SA 3.0
2015-07-07T15:27:02.080Z
The question is motivated from a viewpoint of a personal investor who is interested in increasing his/her returns.
rambalachandran
CC BY-SA 3.0
2015-07-07T15:45:07.380Z
I posted at the Econ Stack to see if they'd like this question migrated.
JTP - Apologise to Monica
CC BY-SA 3.0
2015-07-07T16:17:01.227Z
@WanderingMind "Why" something is happening in global markets is an economic question, regardless of the potential impact on personal finance, just like "Does this medicine cure cancer" could have an impact on investing as well (but would be obviously off topic here).
Joe
CC BY-SA 3.0
2015-07-07T22:33:36.687Z
Detailed answer here
http://economics.stackexchange.com/questions/6304/how-could-greece-related-worries-drive-us-stocks-down-about-2-in-a-day
Giskard
<stock-market>
Why US market is falling due to greece fear?
rambalachandran
# Why US market is falling due to greece fear?

(Asked by: username_0 on 2015-07-07)

I'm kind of curious to learn why US markets are falling due to Greece - Eurozone crisis. US had almost no exposure to Greece bonds and the fear of Grexit and the future of Euro has made the investors to pull out of the European market. But their investments must go somewhere right? Ideally, they could try to invest in US markets, since the macroeconomic indicators of US has been reasonably stable this year. But instead, I see the US markets are also falling? Why is this the case and where is the money pulled out of Eurozone is getting invested?

**Tags:** stock-market

> **Comments:**
> **username_0**: True but the bond market is stuck in extremely low returns due to worldwide QE. Is there any data on which markets or securities/commodities could potentially be gaining at the loss of Eurozone.  
> **username_0**: The question is motivated from a viewpoint of a personal investor who is interested in increasing his/her returns.  
> **username_1**: I posted at the Econ Stack to see if they'd like this question migrated.  
> **username_2**: @WanderingMind "Why" something is happening in global markets is an economic question, regardless of the potential impact on personal finance, just like "Does this medicine cure cancer" could have an impact on investing as well (but would be obviously off topic here).  
> **username_3**: Detailed answer here http://economics.stackexchange.com/questions/6304/how-could-greece-related-worries-drive-us-stocks-down-about-2-in-a-day  

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## 2 answers

### Answer by username_5 on 2015-07-07. Score: 2 | Accepted answer

As dg99 mentioned the response has actually been relatively muted so far in the American markets (SPX down 3% or so from its peak). Generally, problems in major world equity markets cause cascading problems in their trading partners. In this case there are many American companies that have European stores or otherwise sell into European markets that are affected by the turmoil. There are secondary effects as well as companies that trade with affected companies feel the pain and so on.

As you mention the news out of the US has been fairly positive, but a melt down in the EU would likely overwhelm the tepid growth in the North American region.

The important thing to note here is that the investments do not necessarily need to go somewhere. We can just all agree that the value of European investments is significantly less now because future earnings is likely lower (really for any reason) and *the price will change even if no one sells and no money leaves the region*. In a very real sense billions of value just no longer exists. However, it is true some people have been selling and investing elsewhere. The main beneficiary is generally safer instruments like bonds which have rallied somewhat.

> **Comments:**
> **username_0**: Thank you for the response. What makes this change interesting and surprising that Greece seems to be influencing the US markets more than the equity rout in China, since China is not just as big a market as Europe, but it will also affect the manufacturing costs of US companies.  
> **username_6**: @WanderingMind China's equity market crash is pretty self contained to china. It is the new speculators that got burned by the government's pump and dump.  
> **username_7**: Investments *do* need to go somewhere - the stock price is the value that it **was last traded at** - if trading stops then the stock price does not change irrespective of the value of the underlying company. In a liquid market (like any stock exchange) this does not happen - trading occurs all the time and the stock price is always a reasonable proxy for the value of the company as perceived by the market.  
> **username_5**: @username_7 there may be a bit of confusion above as "go somewhere" in the op was generally referring to the money behind the investment rather than the price of the stock. Also, while it is true there would likely be a lot of trading in the situation it is not necessary for the loss of value.  
> **username_5**: Maybe it would help to be careful with the *price* generally "the stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for" vs *last price*.  For instance, "reasonable proxy" is violated >16 hours every day when the markets are closed and can be violated rather dramatically in a crash.  

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### Answer by username_4 on 2015-07-08. Score: 0

Beyond what some of the other answers and comments have mentioned, there are other psychological factors at play:

* Greece leaving the Euro sets a precedent for other countries such as Spain and Portugal who have had austerity measures in place. This could theoretically cascade in to many other countries also leaving the Euro which then adds some major turbulence to global economies.
* More recently, there has also been another mini-correction in the price of oil with Brent falling below $60.
* Heavy turbulence in the Chinese markets must also be considered.
* Markets are trying to predict and factor in upcoming policy decisions by the Fed. Perhaps there is a reduced chance of a U.S. interest rate hike because of poor economic data.


---

