French voters elected Emmanuel Macron as their new president in a landslide on Sunday, and this is allowing the rest of the European Union (EU) to breathe a sigh of relief. His opponent, Marine Le Pen, was open to France leaving the EU (similar to what the United Kingdom is in the process of doing), which could have officially meant the end of the EU. As political stability returns, Europe is also seeing economic stability. The Eurozone grew 1.8% in the first three months of 2017; this was much stronger than the U.S.' growth of 0.7%.
Simply Money Advisors believes the modest first quarter growth in the U.S. was temporary. This is also the view of the Federal Reserve, our nation’s central bank. The Federal Reserve met last week and, as expected, did not raise interest rates. However, the Federal Reserve stated the economic slump in the first three months would not last. This perceived confidence in the economy has resulted in the markets pricing in a 100% chance of an interest rate hike at the Federal Reserve’s June 14th meeting.
The big economic news last week was the strong jobs report for April. The unemployment rate dropped to a 10-year low at 4.4%, and 211,000 new jobs were added. This report reinforces our belief that the poor March jobs report was due to winter storm Stella that hit the Northeast.
The Simply Money Point
There are clearly many good things going on for the U.S. economy, such as a strong job market and rising corporate profits. At Simply Money Advisors, we believe economic growth for all of 2017 to be around 2% in the U.S. This is supportive of higher stock prices over the coming year. However, we do expect stock market turbulence to pick up sometime in the next couple of months. Because of this expectation, we believe a diversified investment mix is still the best way for you to meet your financial goals.