Cheat Sheet Q&A: Impact of the French election to the US economy:
Today's entry: How similar is the French election to Brexit as it pertains to the US economy? Based on the outcome of the French election can we expect a "Brexit" type of reaction in the world financial markets or would it be another Trump bump type of reaction if it's Marine Le Penn since most seem to liken her to Trump?
Bottom Line: Perhaps it's cliche to say it's complicated but it is. I'll start with knowns:
- France is the third largest economy in the Eurozone (behind Germany & England)
- According to my estimates about 3% of the US GDP is determined based on European economics
Brexit was a vote to enact the exit from the Eurozone whereas this an election determining the ruling party in France - which has the potential to result in the eventual exiting of the Euro but not in the immediate future
So the French election is a unique circumstance despite the undercurrent behind Marine Le Penn's support being similar to what led to Brexit and the election of President Trump. Speculation regarding reaction in the financial markets is just that...I have my thoughts about what could occur but markets can act irrationally for short periods of time so it's really just a guesstimate.
In terms of the economy, Le Penn's Nationalist party represents a significant upgrade over the Socialists that have been running France into the ground but it's unclear what the longer term outcome would be. France's economic growth rate hasn't even been as high 2% since 2011 (rebounding from the recession) and it hasn't been above 1.3% in any given quarter since. Here are the economic growth rates for the past three years:
- 2014: .2%
- 2015: .25%
- 2016: .25%
So if France were to break with Socialism and actually were to start growing again it could only be a positive for the US. As an aside despite the lack of financial education about Socialism in the era of Bernie Sanders popularity and education systems that graduate financially illiterate students - Socialism doesn't work, never has and is responsible for the death of more people than any other form of government (including Communism).
More to come but hopefully that's helpful for now.
If you have a topic or question you'd like me to address email me: brianmudd@iheartmedia.com