U.S. GDP, Brexit moves and eurozone elections

In this week’s video update:

  • What might the revised Q4 2016 U.S. GDP to 2.1% mean for the U.S economy in 2017?
  • Are European markets unmoved by the start of the UK exit from the European Union (EU)?
  • What role might eurozone elections play in the markets this year?

On this week’s episode of Market Week in Review, Director of Client Investment Strategies, Mark Eibel joins Sophie Antal-Gilbert, program director, advisor insights, as they recap events and news that may be moving U.S. and European markets in the weeks ahead.

U.S. GDP and economic outlook

First, looking at the U.S. economy and market reaction to news this week about consumer confidence, consumer income and housing data, Gilbert notes that the S&P ® 500 Index reacted positively. Eibel points out that, despite this news, our investment strategists’ still hold the view that U.S. equities are currently over-valued, as recently noted in our 2017 Global Market Outlook Q2 Update.

Eibel then notes the upcoming first quarter U.S. GDP number is a key indicator many are watching to see if the economy is really recovering, or if markets have been overly optimistic about economic growth.

When looking at potential 2017 GDP numbers, he points out that the fourth quarter revision of 2016 U.S. GDP to 2.1% over the initial estimate of 2.0% is not much of a change. This is in line with Russell Investments’ latest market forecast report on the U.S. economic outlook, where our investment strategists believe that 2017 U.S. GDP growth will be much like 2016, hovering around 2.0%.

European markets seem calm as Brexit begins

Eibel then discusses the surprising lack of eurozone market reaction to the UK formally starting its two-year process of the exiting the EU this week. He points out that many market-watchers have been surprised at the resilience of the UK economy, as their consumer confidence continues to be strong. The lack of European market reaction may be due to the length of the Brexit process.

Lastly, Eibel discusses the several upcoming government leadership elections in the eurozone this year and how they are more likely to play into near-term European market performance than the two-year Brexit process, in his view. Eibel notes that, despite the potential political uncertainty at this time, our investment strategists still favor European markets from a cycle, value and sentiment standpoint as noted in the eurozone outlook section of their latest global report.