At mid-year, all eyes are on Greece and the possibility that it will exit the European Union as a result of debt defaults and an extreme aversion to prescribed austerity measures. The “crisis” has dominated financial news like no other story in 2015. Global stock markets are gyrating but have been lower as of late due to the on-again, off-again nature of the negotiations by proxy between Alexis Tsipras and Angela Merkel. Peloton has argued that Greece is too small to matter to the global economy, and even if it leaves the EU, there is unlikely to be significant fallout for Europe or the US. For perspective, consider that the Greek economy has contracted to roughly the size of Iowa’s.

The idea that Greece has borrowed hundreds of billions of Euros without a credible plan for paying it back is not novel. So if (when) it defaults, markets will not be caught off guard. Furthermore, the periphery countries that would have previously been susceptible to contagion from a Greek event – namely Portugal, Spain, and Italy – have implemented austerity measures since the last crisis that reduces their exposure. The persistent weakness in the Euro (relative to the US dollar) is responsible for much of the turmoil in our markets and has crushed commodity prices. Should there be a “Grexit” from the EU, the Euro currency would be stronger fundamentally – another positive for commodities and global stocks. (Incidentally, German exports benefit from a weak Euro, which may partially explain Merkel’s willingness to continue negotiating despite Tsipras’ obstinacy.)

At the same time, questions have been raised about China’s growth trajectory. This gets less coverage, but has likely dampened markets more than Grexit concerns. A meaningful Chinese slowdown would reverberate around the world and could hurt stocks much more than Greece can. Keep in mind that the Chinese economy – and to a large extent its stock market – is controlled by the government, which amplifies volatility in both. We believe the Chinese economy is still on solid footing and that the government will be able to continue managing growth there. In a recent speech, San Francisco Fed President John Williams remarked, “I visited China recently, and I arrived fully cognizant of the concerns people highlight—slower growth, the unsustainability of the current export-driven model, debt buildup, bubbles in the equity and housing markets, the risk of falling investment, and the overall international implications of those risks. But I have to say that, after talking to officials and academics there, I was a lot less concerned about China’s near-term economic outlook on my return flight than I was heading over.”

It is somewhat perplexing that a voting FOMC member felt compelled to address the Chinese economy when everyone is desperately trying to determine the timing of the first interest rate hike. The Fed has two mandates: price stability and full employment – in the U.S. Some believe that international concerns like Greece and China will keep the Fed on hold until 2016. We hope not. The economy can handle marginally higher rates, and the sooner the Fed begins normalizing fixed income markets, the better.

In the second half of the year, GDP growth will likely accelerate, and corporate profits will benefit from an energy tailwind. Labor markets are tightening, and inflation remains low (Fed mandates). If the Fed remains “data dependent” as it has said, it cannot ignore the data indefinitely and should raise rates in September.