Finimize - 🇬🇧 The UK voted in a new government

What’s going on here?

Labour leader Keir Starmer will become the British Prime Minister, after a landslide vote pushed the opposing Conservative Party to its worst-ever defeat.

What does this mean?

The Labour Party will fill at least 412 parliamentary seats with politicians, well over the 326 needed for a majority. That support should make it easier for the Prime Minister to push through policies – and the priority is propping up the UK’s economy, which has struggled since Brexit and the pandemic. Both analysts and cash-strapped Brits are hoping that’ll lead to political and economic stability. If they’re right, the UK will become a much more attractive investment destination for investors both home and away.

Why should I care?

For markets: Talk about a stiff upper lip.

The British pound sterling has been one of the strongest currencies this year, supported by high interest rates. UK stocks are trading near their record highs, too, although they’re cheaper than those in the European Union, Japan, and the US. Now, this election outcome was predicted in the polls, so there weren’t many surprises to shake up the stock market – besides a handful of building companies’ stocks ticking up in anticipation of new supportive policies. But there may be more moves ahead as details spread about the new government’s tax and spending plans.

The bigger picture: Eyes on the prize.

Election results can be much more volatile: they were in France, Mexico, and India – and the US might contribute to the chaos. The former President’s potential policies include lowering taxes to increase folks’ income and bumping up tariffs on China’s exports to protect stateside jobs. But on the other side of that coin, both actions could lead to higher inflation and, in turn, higher interest rates. It’s impossible to predict the outcome, of course, so investors should focus on long-term prospects rather than short-term volatility.

What’s going on here?

The US created more jobs than expected in June, but that hardy showing might be hiding some inner weaknesses.

What does this mean?

The US added 206,000 jobs in June, slightly more than the expected 190,000. But April and May’s numbers were revised downward by a total of 111,000, suggesting that the labor market is weaker than June’s figure indicates. Plus, the average number of workers on payroll each month has been increasing by a lot less this year than the two before. Unemployment edged up to 4.1%, too, just a touch higher than predicted. And for those in jobs, average hourly earnings increased 3.9% from a year ago as expected – the lowest in three years.

Why should I care?

For markets: A balancing act.

The Federal Reserve (Fed) has two main responsibilities: keep prices stable and maximize employment. And while the recent increase in unemployment will be on the central bank’s radar, inflation is still the main focus. The Fed’s favored measure for that came in at 2.6% for May – the lowest since March 2021, but still above its 2% target. And reaching that goal is easier said than done. Cut rates too early, and inflation may pick up again. Leave it too late, and the economy might slow down – or even fall into a recession. That’s why traders are betting that the first cut won’t come until September.

The bigger picture: A league of their own.

Higher interest rates are a thorn in the side for companies with a lot of debt on the books, forcing them to pay more on their borrowed cash. But America’s hulking tech giants seem to be immune to the damage, boasting swollen cash piles, pumped-up profit, and runaway stock prices. When the Fed does cut interest rates, though, cheaper borrowing costs could give smaller companies the chance to compete.