U.S. Equities Stand Firm After French, Greek Elections 2012:
U.S. stocks fell sharply in early trading but rebounded later in the day as investors digested the news about the French and Greek elections May 2o12. France ushered in a new era of “Socialism based on growth” with the election of Francois Hollande while Greeks overwhelmingly rejected austerity by changing the makeup of their government.
The Communist Party, the Coalition of the Radical Left is now the second largest party in the new Greek government but they also seem to want a new “pro-growth” agenda that rejects austerity.
Is A New Pro-Growth Global Agenda Occurring?
European equities markets largely closed higher and U.S. equities held key resistance levels because some market participants believe rejecting austerity abroad could be good for U.S. equities. Another interpretation of today’s market action could be related to new money flows reaching the U.S. as it becomes a more stable, safe haven globally in the short term.
Pro-growth policies in Europe abroad will have a positive impact on global economic performance. Some speculation has begun that the euro may break down as countries seek independent monetary and fiscal policy but we believe this would be a long term positive for the region so inter-Europe decoupling can occur.
The S&P 500 stayed near key support levels of 1,370 we have been watching and the medium term outlook favors new highs as markets may be short term oversold in anticipation of the political economy risk in Europe.