In the UK, the dip in first-quarter economic growth may not bode well for the current government just days before a general election, but it should not be taken as a signal of an economy beginning to stumble. Furthermore, economic activity should increase over the latter half of the year as the global economy gains momentum. History shows that political uncertainty has had little bearing on longer-term economic growth, and the UK economy was quick to recover from the 2010 election and the 2014 Scottish referendum.
For the US, the miss on economic growth was bigger than expected, but better weather in the second quarter, the resolution of the dock-workers’ strike, and a pick-up in retail spending should allow economic activity to accelerate over the rest of the year.
Investors should focus on the knowns: the economic outlook in the US and the UK is improving, and higher rates are on the cards. However, the big unknown is how we get there, and investors should prepare themselves for a rough ride ahead.
Kerry Craig is global market strategist of JP Morgan Asset Management
